Correlation Between HSBC Holdings and RLJ Lodging
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings 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 HSBC Holdings and RLJ Lodging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HSBC Holdings PLC and RLJ Lodging Trust, you can compare the effects of market volatilities on HSBC Holdings 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 HSBC Holdings with a short position of RLJ Lodging. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and RLJ Lodging.
Diversification Opportunities for HSBC Holdings and RLJ Lodging
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between HSBC and RLJ is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings PLC 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 HSBC Holdings 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 HSBC Holdings PLC 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 HSBC Holdings i.e., HSBC Holdings and RLJ Lodging go up and down completely randomly.
Pair Corralation between HSBC Holdings and RLJ Lodging
Given the investment horizon of 90 days HSBC Holdings PLC is expected to generate 1.21 times more return on investment than RLJ Lodging. However, HSBC Holdings is 1.21 times more volatile than RLJ Lodging Trust. It trades about 0.41 of its potential returns per unit of risk. RLJ Lodging Trust is currently generating about -0.36 per unit of risk. If you would invest 5,196 in HSBC Holdings PLC on November 29, 2024 and sell it today you would earn a total of 628.00 from holding HSBC Holdings PLC or generate 12.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HSBC Holdings PLC vs. RLJ Lodging Trust
Performance |
| Timeline |
| HSBC Holdings PLC |
| RLJ Lodging Trust |
HSBC Holdings and RLJ Lodging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC Holdings and RLJ Lodging
The main advantage of trading using opposite HSBC Holdings and RLJ Lodging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings 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.| HSBC Holdings vs. ING Group NV | HSBC Holdings vs. Natwest Group PLC | HSBC Holdings vs. Banco Santander SA | HSBC Holdings vs. UBS Group AG |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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