Correlation Between RLJ Lodging and Parker Hannifin
Can any of the company-specific risk be diversified away by investing in both RLJ Lodging and Parker Hannifin 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 Parker Hannifin 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 Parker Hannifin, you can compare the effects of market volatilities on RLJ Lodging and Parker Hannifin 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 Parker Hannifin. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLJ Lodging and Parker Hannifin.
Diversification Opportunities for RLJ Lodging and Parker Hannifin
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between RLJ and Parker is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust and Parker Hannifin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parker Hannifin 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 Parker Hannifin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parker Hannifin has no effect on the direction of RLJ Lodging i.e., RLJ Lodging and Parker Hannifin go up and down completely randomly.
Pair Corralation between RLJ Lodging and Parker Hannifin
Assuming the 90 days trading horizon RLJ Lodging is expected to generate 16.55 times less return on investment than Parker Hannifin. But when comparing it to its historical volatility, RLJ Lodging Trust is 2.76 times less risky than Parker Hannifin. It trades about 0.02 of its potential returns per unit of risk. Parker Hannifin is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 57,399 in Parker Hannifin on November 2, 2024 and sell it today you would earn a total of 12,990 from holding Parker Hannifin or generate 22.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
RLJ Lodging Trust vs. Parker Hannifin
Performance |
| Timeline |
| RLJ Lodging Trust |
| Parker Hannifin |
RLJ Lodging and Parker Hannifin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RLJ Lodging and Parker Hannifin
The main advantage of trading using opposite RLJ Lodging and Parker Hannifin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLJ Lodging position performs unexpectedly, Parker Hannifin 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 Parker Hannifin will offset losses from the drop in Parker Hannifin's long position.| RLJ Lodging vs. Diamondrock Hospitality | RLJ Lodging vs. Summit Hotel Properties | RLJ Lodging vs. Pebblebrook Hotel Trust | RLJ Lodging vs. Sunstone Hotel Investors |
| Parker Hannifin vs. Aquagold International | Parker Hannifin vs. Morningstar Unconstrained Allocation | Parker Hannifin vs. Thrivent High Yield | Parker Hannifin vs. High Yield Municipal Fund |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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