Correlation Between Realty Income and RLJ Lodging
Can any of the company-specific risk be diversified away by investing in both Realty Income 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 Realty Income and RLJ Lodging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Realty Income and RLJ Lodging Trust, you can compare the effects of market volatilities on Realty Income 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 Realty Income with a short position of RLJ Lodging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Realty Income and RLJ Lodging.
Diversification Opportunities for Realty Income and RLJ Lodging
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Realty and RLJ is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income 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 Realty Income 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 Realty Income 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 Realty Income i.e., Realty Income and RLJ Lodging go up and down completely randomly.
Pair Corralation between Realty Income and RLJ Lodging
Taking into account the 90-day investment horizon Realty Income is expected to generate 0.76 times more return on investment than RLJ Lodging. However, Realty Income is 1.31 times less risky than RLJ Lodging. It trades about 0.05 of its potential returns per unit of risk. RLJ Lodging Trust is currently generating about 0.0 per unit of risk. If you would invest 5,089 in Realty Income on August 24, 2024 and sell it today you would earn a total of 680.50 from holding Realty Income or generate 13.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Realty Income vs. RLJ Lodging Trust
Performance |
| Timeline |
| Realty Income |
| RLJ Lodging Trust |
Realty Income and RLJ Lodging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Realty Income and RLJ Lodging
The main advantage of trading using opposite Realty Income and RLJ Lodging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Realty Income 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.| Realty Income vs. Federal Realty Investment | Realty Income vs. Agree Realty | Realty Income vs. Tanger Factory Outlet | Realty Income vs. Netstreit Corp |
| 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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