Correlation Between Pebblebrook Hotel and LVMH Moët

Can any of the company-specific risk be diversified away by investing in both Pebblebrook Hotel and LVMH Moët 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 Pebblebrook Hotel and LVMH Moët into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pebblebrook Hotel Trust and LVMH Mot Hennessy, you can compare the effects of market volatilities on Pebblebrook Hotel and LVMH Moët 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 Pebblebrook Hotel with a short position of LVMH Moët. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pebblebrook Hotel and LVMH Moët.

Diversification Opportunities for Pebblebrook Hotel and LVMH Moët

0.2

Correlation Coefficient

Pebblebrook Hotel  LVMH Moët

Modest diversification

The 3 months correlation between Pebblebrook and LVMH is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Pebblebrook Hotel Trust and LVMH Mot Hennessy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LVMH Mot Hennessy and Pebblebrook Hotel 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 Pebblebrook Hotel Trust are associated (or correlated) with LVMH Moët. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LVMH Mot Hennessy has no effect on the direction of Pebblebrook Hotel i.e., Pebblebrook Hotel and LVMH Moët go up and down completely randomly.

Pair Corralation between Pebblebrook Hotel and LVMH Moët

Assuming the 90 days trading horizon Pebblebrook Hotel is expected to generate 4.75 times less return on investment than LVMH Moët. But when comparing it to its historical volatility, Pebblebrook Hotel Trust is 1.22 times less risky than LVMH Moët. It trades about 0.05 of its potential returns per unit of risk. LVMH Mot Hennessy is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  11,483  in LVMH Mot Hennessy on September 29, 2024 and sell it today you would earn a total of  1,117  from holding LVMH Mot Hennessy or generate 9.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Pebblebrook Hotel Trust  vs.  LVMH Mot Hennessy

Pebblebrook Hotel Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pebblebrook Hotel Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Pebblebrook Hotel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

LVMH Mot Hennessy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LVMH Mot Hennessy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, LVMH Moët is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Pebblebrook Hotel and LVMH Moët

The main advantage of trading using opposite Pebblebrook Hotel and LVMH Moët positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pebblebrook Hotel position performs unexpectedly, LVMH Moët 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 LVMH Moët will offset losses from the drop in LVMH Moët's long position.

The idea behind Pebblebrook Hotel Trust and LVMH Mot Hennessy 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.