Correlation Between RLJ Lodging and Bank of Montreal
Can any of the company-specific risk be diversified away by investing in both RLJ Lodging and Bank of Montreal 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 Bank of Montreal 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 Bank of Montreal, you can compare the effects of market volatilities on RLJ Lodging and Bank of Montreal 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 Bank of Montreal. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLJ Lodging and Bank of Montreal.
Diversification Opportunities for RLJ Lodging and Bank of Montreal
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between RLJ and Bank is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust and Bank of Montreal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Montreal 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 Bank of Montreal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Montreal has no effect on the direction of RLJ Lodging i.e., RLJ Lodging and Bank of Montreal go up and down completely randomly.
Pair Corralation between RLJ Lodging and Bank of Montreal
Considering the 90-day investment horizon RLJ Lodging is expected to generate 10.04 times less return on investment than Bank of Montreal. In addition to that, RLJ Lodging is 1.1 times more volatile than Bank of Montreal. It trades about 0.0 of its total potential returns per unit of risk. Bank of Montreal is currently generating about 0.05 per unit of volatility. If you would invest 8,107 in Bank of Montreal on August 31, 2024 and sell it today you would earn a total of 1,389 from holding Bank of Montreal or generate 17.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
RLJ Lodging Trust vs. Bank of Montreal
Performance |
| Timeline |
| RLJ Lodging Trust |
| Bank of Montreal |
RLJ Lodging and Bank of Montreal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RLJ Lodging and Bank of Montreal
The main advantage of trading using opposite RLJ Lodging and Bank of Montreal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLJ Lodging position performs unexpectedly, Bank of Montreal 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 Bank of Montreal will offset losses from the drop in Bank of Montreal's long position.| RLJ Lodging vs. Sunstone Hotel Investors | RLJ Lodging vs. Pebblebrook Hotel Trust | RLJ Lodging vs. Ryman Hospitality Properties | RLJ Lodging vs. Chatham Lodging Trust |
| Bank of Montreal vs. RLJ Lodging Trust | Bank of Montreal vs. Aquagold International | Bank of Montreal vs. Stepstone Group | Bank of Montreal vs. Morningstar Unconstrained Allocation |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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