Correlation Between Chevron Corp and RLJ Lodging
Can any of the company-specific risk be diversified away by investing in both Chevron Corp 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 Chevron Corp and RLJ Lodging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chevron Corp and RLJ Lodging Trust, you can compare the effects of market volatilities on Chevron Corp 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 Chevron Corp with a short position of RLJ Lodging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and RLJ Lodging.
Diversification Opportunities for Chevron Corp and RLJ Lodging
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chevron and RLJ is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Chevron 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 Chevron Corp 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 Chevron 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 Chevron Corp i.e., Chevron Corp and RLJ Lodging go up and down completely randomly.
Pair Corralation between Chevron Corp and RLJ Lodging
Considering the 90-day investment horizon Chevron Corp is expected to generate 0.83 times more return on investment than RLJ Lodging. However, Chevron Corp is 1.21 times less risky than RLJ Lodging. It trades about 0.02 of its potential returns per unit of risk. RLJ Lodging Trust is currently generating about 0.01 per unit of risk. If you would invest 14,808 in Chevron Corp on August 31, 2024 and sell it today you would earn a total of 1,403 from holding Chevron Corp or generate 9.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chevron Corp vs. RLJ Lodging Trust
Performance |
| Timeline |
| Chevron Corp |
| RLJ Lodging Trust |
Chevron Corp and RLJ Lodging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chevron Corp and RLJ Lodging
The main advantage of trading using opposite Chevron Corp and RLJ Lodging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp 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.| Chevron Corp vs. RLJ Lodging Trust | Chevron Corp vs. Aquagold International | Chevron Corp vs. Stepstone Group | Chevron Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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