Correlation Between Hudson Pacific and RLJ Lodging
Can any of the company-specific risk be diversified away by investing in both Hudson Pacific 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 Hudson Pacific and RLJ Lodging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hudson Pacific Properties and RLJ Lodging Trust, you can compare the effects of market volatilities on Hudson Pacific 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 Hudson Pacific with a short position of RLJ Lodging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hudson Pacific and RLJ Lodging.
Diversification Opportunities for Hudson Pacific and RLJ Lodging
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Hudson and RLJ is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Hudson Pacific Properties 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 Hudson Pacific 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 Hudson Pacific Properties 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 Hudson Pacific i.e., Hudson Pacific and RLJ Lodging go up and down completely randomly.
Pair Corralation between Hudson Pacific and RLJ Lodging
Considering the 90-day investment horizon Hudson Pacific Properties is expected to under-perform the RLJ Lodging. In addition to that, Hudson Pacific is 2.59 times more volatile than RLJ Lodging Trust. It trades about -0.04 of its total potential returns per unit of risk. RLJ Lodging Trust is currently generating about -0.01 per unit of volatility. If you would invest 1,166 in RLJ Lodging Trust on October 25, 2024 and sell it today you would lose (175.00) from holding RLJ Lodging Trust or give up 15.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hudson Pacific Properties vs. RLJ Lodging Trust
Performance |
| Timeline |
| Hudson Pacific Properties |
| RLJ Lodging Trust |
Hudson Pacific and RLJ Lodging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hudson Pacific and RLJ Lodging
The main advantage of trading using opposite Hudson Pacific and RLJ Lodging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hudson Pacific 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.| Hudson Pacific vs. Kilroy Realty Corp | Hudson Pacific vs. Highwoods Properties | Hudson Pacific vs. Cousins Properties Incorporated | Hudson Pacific vs. Piedmont Office Realty |
| 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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