Correlation Between RLJ Lodging and Arhaus
Can any of the company-specific risk be diversified away by investing in both RLJ Lodging and Arhaus 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 Arhaus 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 Arhaus Inc, you can compare the effects of market volatilities on RLJ Lodging and Arhaus 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 Arhaus. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLJ Lodging and Arhaus.
Diversification Opportunities for RLJ Lodging and Arhaus
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between RLJ and Arhaus is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust and Arhaus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arhaus 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 Arhaus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arhaus Inc has no effect on the direction of RLJ Lodging i.e., RLJ Lodging and Arhaus go up and down completely randomly.
Pair Corralation between RLJ Lodging and Arhaus
Considering the 90-day investment horizon RLJ Lodging is expected to generate 1.04 times less return on investment than Arhaus. But when comparing it to its historical volatility, RLJ Lodging Trust is 2.18 times less risky than Arhaus. It trades about 0.47 of its potential returns per unit of risk. Arhaus Inc is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 855.00 in Arhaus Inc on September 2, 2024 and sell it today you would earn a total of 138.00 from holding Arhaus Inc or generate 16.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RLJ Lodging Trust vs. Arhaus Inc
Performance |
| Timeline |
| RLJ Lodging Trust |
| Arhaus Inc |
RLJ Lodging and Arhaus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RLJ Lodging and Arhaus
The main advantage of trading using opposite RLJ Lodging and Arhaus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLJ Lodging position performs unexpectedly, Arhaus 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 Arhaus will offset losses from the drop in Arhaus' long position.| RLJ Lodging vs. Sunstone Hotel Investors | RLJ Lodging vs. Pebblebrook Hotel Trust | RLJ Lodging vs. Summit Hotel Properties | RLJ Lodging vs. Ryman Hospitality Properties |
| Arhaus vs. Purple Innovation | Arhaus vs. Mohawk Industries | Arhaus vs. La Z Boy Incorporated | Arhaus vs. Leggett Platt Incorporated |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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