Correlation Between New York and RLJ Lodging
Can any of the company-specific risk be diversified away by investing in both New York 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 New York and RLJ Lodging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New York Mortgage and RLJ Lodging Trust, you can compare the effects of market volatilities on New York 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 New York with a short position of RLJ Lodging. Check out your portfolio center. Please also check ongoing floating volatility patterns of New York and RLJ Lodging.
Diversification Opportunities for New York and RLJ Lodging
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between New and RLJ is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding New York Mortgage 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 New York 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 New York Mortgage 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 New York i.e., New York and RLJ Lodging go up and down completely randomly.
Pair Corralation between New York and RLJ Lodging
Assuming the 90 days horizon New York Mortgage is expected to generate 1.02 times more return on investment than RLJ Lodging. However, New York is 1.02 times more volatile than RLJ Lodging Trust. It trades about 0.17 of its potential returns per unit of risk. RLJ Lodging Trust is currently generating about 0.11 per unit of risk. If you would invest 2,008 in New York Mortgage on August 24, 2024 and sell it today you would earn a total of 504.00 from holding New York Mortgage or generate 25.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New York Mortgage vs. RLJ Lodging Trust
Performance |
| Timeline |
| New York Mortgage |
| RLJ Lodging Trust |
New York and RLJ Lodging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New York and RLJ Lodging
The main advantage of trading using opposite New York and RLJ Lodging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New York 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.| New York vs. New York Mortgage | New York vs. AGNC Investment Corp | New York vs. Chimera Investment | New York vs. AGNC Investment Corp |
| RLJ Lodging vs. Ashford Hospitality Trust | RLJ Lodging vs. Braemar Hotels Resorts | RLJ Lodging vs. Braemar Hotels Resorts | RLJ Lodging vs. Ashford Hospitality 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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