Correlation Between Ark Restaurants and RLJ Lodging
Can any of the company-specific risk be diversified away by investing in both Ark Restaurants and RLJ Lodging 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 Ark Restaurants and RLJ Lodging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ark Restaurants Corp and RLJ Lodging Trust, you can compare the effects of market volatilities on Ark Restaurants and RLJ Lodging 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 Ark Restaurants with a short position of RLJ Lodging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ark Restaurants and RLJ Lodging.
Diversification Opportunities for Ark Restaurants and RLJ Lodging
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ark and RLJ is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Ark Restaurants Corp and RLJ Lodging Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RLJ Lodging Trust and Ark Restaurants 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 Ark Restaurants Corp are associated (or correlated) with RLJ Lodging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RLJ Lodging Trust has no effect on the direction of Ark Restaurants i.e., Ark Restaurants and RLJ Lodging go up and down completely randomly.
Pair Corralation between Ark Restaurants and RLJ Lodging
Given the investment horizon of 90 days Ark Restaurants Corp is expected to generate 1.3 times more return on investment than RLJ Lodging. However, Ark Restaurants is 1.3 times more volatile than RLJ Lodging Trust. It trades about -0.05 of its potential returns per unit of risk. RLJ Lodging Trust is currently generating about -0.26 per unit of risk. If you would invest 1,062 in Ark Restaurants Corp on January 4, 2025 and sell it today you would lose (42.00) from holding Ark Restaurants Corp or give up 3.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ark Restaurants Corp vs. RLJ Lodging Trust
Performance |
| Timeline |
| Ark Restaurants Corp |
| RLJ Lodging Trust |
Ark Restaurants and RLJ Lodging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ark Restaurants and RLJ Lodging
The main advantage of trading using opposite Ark Restaurants and RLJ Lodging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ark Restaurants position performs unexpectedly, RLJ Lodging 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 RLJ Lodging will offset losses from the drop in RLJ Lodging's long position.| Ark Restaurants vs. Nathans Famous | Ark Restaurants vs. Flanigans Enterprises | Ark Restaurants vs. Good Times Restaurants | Ark Restaurants vs. Auburn National Bancorporation |
| RLJ Lodging vs. Sunstone Hotel Investors | RLJ Lodging vs. Pebblebrook Hotel Trust | RLJ Lodging vs. Summit Hotel Properties | RLJ Lodging vs. Ryman Hospitality Properties |
Check out your portfolio center.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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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