Correlation Between Global Net and RLJ Lodging
Can any of the company-specific risk be diversified away by investing in both Global Net 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 Global Net and RLJ Lodging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Net Lease and RLJ Lodging Trust, you can compare the effects of market volatilities on Global Net 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 Global Net with a short position of RLJ Lodging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Net and RLJ Lodging.
Diversification Opportunities for Global Net and RLJ Lodging
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Global and RLJ is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Global Net Lease 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 Global Net 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 Global Net Lease 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 Global Net i.e., Global Net and RLJ Lodging go up and down completely randomly.
Pair Corralation between Global Net and RLJ Lodging
Assuming the 90 days trading horizon Global Net is expected to generate 1.16 times less return on investment than RLJ Lodging. In addition to that, Global Net is 2.71 times more volatile than RLJ Lodging Trust. It trades about 0.02 of its total potential returns per unit of risk. RLJ Lodging Trust is currently generating about 0.06 per unit of volatility. If you would invest 2,108 in RLJ Lodging Trust on November 5, 2024 and sell it today you would earn a total of 399.00 from holding RLJ Lodging Trust or generate 18.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Net Lease vs. RLJ Lodging Trust
Performance |
| Timeline |
| Global Net Lease |
| RLJ Lodging Trust |
Global Net and RLJ Lodging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Net and RLJ Lodging
The main advantage of trading using opposite Global Net and RLJ Lodging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Net 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.| Global Net vs. Modiv Inc | Global Net vs. Precinct Properties New | Global Net vs. Global Net Lease | Global Net vs. NexPoint Diversified Real |
| RLJ Lodging vs. Ashford Hospitality Trust | RLJ Lodging vs. Ashford Hospitality Trust | RLJ Lodging vs. Braemar Hotels Resorts | RLJ Lodging vs. Braemar Hotels Resorts |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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