Correlation Between RLJ Lodging and Century Aluminum
Can any of the company-specific risk be diversified away by investing in both RLJ Lodging and Century Aluminum 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 Century Aluminum 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 Century Aluminum, you can compare the effects of market volatilities on RLJ Lodging and Century Aluminum 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 Century Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLJ Lodging and Century Aluminum.
Diversification Opportunities for RLJ Lodging and Century Aluminum
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RLJ and Century is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust and Century Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Aluminum 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 Century Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Aluminum has no effect on the direction of RLJ Lodging i.e., RLJ Lodging and Century Aluminum go up and down completely randomly.
Pair Corralation between RLJ Lodging and Century Aluminum
Considering the 90-day investment horizon RLJ Lodging is expected to generate 2.59 times less return on investment than Century Aluminum. But when comparing it to its historical volatility, RLJ Lodging Trust is 2.9 times less risky than Century Aluminum. It trades about 0.3 of its potential returns per unit of risk. Century Aluminum is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 1,765 in Century Aluminum on August 31, 2024 and sell it today you would earn a total of 539.00 from holding Century Aluminum or generate 30.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RLJ Lodging Trust vs. Century Aluminum
Performance |
| Timeline |
| RLJ Lodging Trust |
| Century Aluminum |
RLJ Lodging and Century Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RLJ Lodging and Century Aluminum
The main advantage of trading using opposite RLJ Lodging and Century Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLJ Lodging position performs unexpectedly, Century Aluminum 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 Century Aluminum will offset losses from the drop in Century Aluminum'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 |
| Century Aluminum vs. RLJ Lodging Trust | Century Aluminum vs. Aquagold International | Century Aluminum vs. Stepstone Group | Century Aluminum 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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