Correlation Between Citigroup and Pebblebrook Hotel

Can any of the company-specific risk be diversified away by investing in both Citigroup and Pebblebrook Hotel at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Citigroup and Pebblebrook Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citigroup and Pebblebrook Hotel Trust, you can compare the effects of market volatilities on Citigroup and Pebblebrook Hotel and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Citigroup with a short position of Pebblebrook Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Pebblebrook Hotel.

Diversification Opportunities for Citigroup and Pebblebrook Hotel

-0.41

Correlation Coefficient

Citigroup  Pebblebrook Hotel

Very good diversification

The 3 months correlation between Citigroup and Pebblebrook is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Pebblebrook Hotel Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pebblebrook Hotel Trust and Citigroup is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Citigroup are associated (or correlated) with Pebblebrook Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pebblebrook Hotel Trust has no effect on the direction of Citigroup i.e., Citigroup and Pebblebrook Hotel go up and down completely randomly.

Pair Corralation between Citigroup and Pebblebrook Hotel

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.91 times more return on investment than Pebblebrook Hotel. However, Citigroup is 1.91 times more volatile than Pebblebrook Hotel Trust. It trades about 0.19 of its potential returns per unit of risk. Pebblebrook Hotel Trust is currently generating about -0.02 per unit of risk. If you would invest  5,716  in Citigroup on September 13, 2024 and sell it today you would earn a total of  1,427  from holding Citigroup or generate 24.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Citigroup  vs.  Pebblebrook Hotel Trust

Citigroup

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pebblebrook Hotel Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pebblebrook Hotel Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, Pebblebrook Hotel is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Citigroup and Pebblebrook Hotel

The main advantage of trading using opposite Citigroup and Pebblebrook Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Pebblebrook Hotel can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Pebblebrook Hotel will offset losses from the drop in Pebblebrook Hotel's long position.

The idea behind Citigroup and Pebblebrook Hotel Trust pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Volatility Analysis module to get historical volatility and risk analysis based on latest market data.