Correlation Between Pebblebrook Hotel and Starbucks

Can any of the company-specific risk be diversified away by investing in both Pebblebrook Hotel and Starbucks 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 Starbucks 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 Starbucks, you can compare the effects of market volatilities on Pebblebrook Hotel and Starbucks 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 Starbucks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pebblebrook Hotel and Starbucks.

Diversification Opportunities for Pebblebrook Hotel and Starbucks

0.64

Correlation Coefficient

Pebblebrook Hotel  Starbucks

Poor diversification

The 3 months correlation between Pebblebrook and Starbucks is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Pebblebrook Hotel Trust and Starbucks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Starbucks 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 Starbucks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Starbucks has no effect on the direction of Pebblebrook Hotel i.e., Pebblebrook Hotel and Starbucks go up and down completely randomly.

Pair Corralation between Pebblebrook Hotel and Starbucks

Considering the 90-day investment horizon Pebblebrook Hotel Trust is expected to generate 0.67 times more return on investment than Starbucks. However, Pebblebrook Hotel Trust is 1.49 times less risky than Starbucks. It trades about -0.15 of its potential returns per unit of risk. Starbucks is currently generating about -0.19 per unit of risk. If you would invest  1,621  in Pebblebrook Hotel Trust on February 5, 2024 and sell it today you would lose (175.00) from holding Pebblebrook Hotel Trust or give up 10.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Pebblebrook Hotel Trust  vs.  Starbucks

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 somewhat strong technical and fundamental indicators, Pebblebrook Hotel is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Starbucks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Starbucks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Pebblebrook Hotel and Starbucks

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

The idea behind Pebblebrook Hotel Trust and Starbucks 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.