Correlation Between RLJ Lodging and Modiv
Can any of the company-specific risk be diversified away by investing in both RLJ Lodging and Modiv 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 RLJ Lodging and Modiv into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RLJ Lodging Trust and Modiv Inc, you can compare the effects of market volatilities on RLJ Lodging and Modiv 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 RLJ Lodging with a short position of Modiv. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLJ Lodging and Modiv.
Diversification Opportunities for RLJ Lodging and Modiv
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between RLJ and Modiv is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust and Modiv Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modiv Inc and RLJ Lodging 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 RLJ Lodging Trust are associated (or correlated) with Modiv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modiv Inc has no effect on the direction of RLJ Lodging i.e., RLJ Lodging and Modiv go up and down completely randomly.
Pair Corralation between RLJ Lodging and Modiv
Assuming the 90 days trading horizon RLJ Lodging is expected to generate 1.93 times less return on investment than Modiv. But when comparing it to its historical volatility, RLJ Lodging Trust is 2.44 times less risky than Modiv. It trades about 0.06 of its potential returns per unit of risk. Modiv Inc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,810 in Modiv Inc on August 27, 2024 and sell it today you would earn a total of 660.00 from holding Modiv Inc or generate 36.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
RLJ Lodging Trust vs. Modiv Inc
Performance |
| Timeline |
| RLJ Lodging Trust |
| Modiv Inc |
RLJ Lodging and Modiv Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RLJ Lodging and Modiv
The main advantage of trading using opposite RLJ Lodging and Modiv positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLJ Lodging position performs unexpectedly, Modiv 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 Modiv will offset losses from the drop in Modiv's long position.| RLJ Lodging vs. Ashford Hospitality Trust | RLJ Lodging vs. Braemar Hotels Resorts | RLJ Lodging vs. Braemar Hotels Resorts | RLJ Lodging vs. Aspen Digital |
| Modiv vs. SiriusPoint | Modiv vs. RLJ Lodging Trust | Modiv vs. ARMOUR Residential REIT | Modiv vs. Sachem Capital Corp |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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