Correlation Between Bank of Montreal and RLJ Lodging
Can any of the company-specific risk be diversified away by investing in both Bank of Montreal 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 Bank of Montreal and RLJ Lodging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of Montreal and RLJ Lodging Trust, you can compare the effects of market volatilities on Bank of Montreal 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 Bank of Montreal with a short position of RLJ Lodging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Montreal and RLJ Lodging.
Diversification Opportunities for Bank of Montreal and RLJ Lodging
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and RLJ is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Montreal 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 Bank of Montreal 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 Bank of Montreal 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 Bank of Montreal i.e., Bank of Montreal and RLJ Lodging go up and down completely randomly.
Pair Corralation between Bank of Montreal and RLJ Lodging
Considering the 90-day investment horizon Bank of Montreal is expected to generate 3.36 times less return on investment than RLJ Lodging. But when comparing it to its historical volatility, Bank of Montreal is 2.14 times less risky than RLJ Lodging. It trades about 0.19 of its potential returns per unit of risk. RLJ Lodging Trust is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 909.00 in RLJ Lodging Trust on August 31, 2024 and sell it today you would earn a total of 105.00 from holding RLJ Lodging Trust or generate 11.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of Montreal vs. RLJ Lodging Trust
Performance |
| Timeline |
| Bank of Montreal |
| RLJ Lodging Trust |
Bank of Montreal and RLJ Lodging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Montreal and RLJ Lodging
The main advantage of trading using opposite Bank of Montreal and RLJ Lodging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Montreal 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.| Bank of Montreal vs. RLJ Lodging Trust | Bank of Montreal vs. Aquagold International | Bank of Montreal vs. Stepstone Group | Bank of Montreal vs. Morningstar Unconstrained Allocation |
| RLJ Lodging vs. Sunstone Hotel Investors | RLJ Lodging vs. Pebblebrook Hotel Trust | RLJ Lodging vs. Ryman Hospitality Properties | RLJ Lodging vs. Chatham Lodging Trust |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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