Correlation Between RLJ Lodging and Chatham Lodging
Can any of the company-specific risk be diversified away by investing in both RLJ Lodging and Chatham Lodging 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 Chatham Lodging 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 Chatham Lodging Trust, you can compare the effects of market volatilities on RLJ Lodging and Chatham Lodging 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 Chatham Lodging. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLJ Lodging and Chatham Lodging.
Diversification Opportunities for RLJ Lodging and Chatham Lodging
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between RLJ and Chatham is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust and Chatham Lodging Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chatham Lodging Trust 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 Chatham Lodging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chatham Lodging Trust has no effect on the direction of RLJ Lodging i.e., RLJ Lodging and Chatham Lodging go up and down completely randomly.
Pair Corralation between RLJ Lodging and Chatham Lodging
Considering the 90-day investment horizon RLJ Lodging is expected to generate 1.18 times less return on investment than Chatham Lodging. But when comparing it to its historical volatility, RLJ Lodging Trust is 1.68 times less risky than Chatham Lodging. It trades about 0.3 of its potential returns per unit of risk. Chatham Lodging Trust is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 825.00 in Chatham Lodging Trust on August 28, 2024 and sell it today you would earn a total of 105.00 from holding Chatham Lodging Trust or generate 12.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
RLJ Lodging Trust vs. Chatham Lodging Trust
Performance |
| Timeline |
| RLJ Lodging Trust |
| Chatham Lodging Trust |
RLJ Lodging and Chatham Lodging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RLJ Lodging and Chatham Lodging
The main advantage of trading using opposite RLJ Lodging and Chatham Lodging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLJ Lodging position performs unexpectedly, Chatham Lodging 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 Chatham Lodging will offset losses from the drop in Chatham Lodging's 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 |
| Chatham Lodging vs. Summit Hotel Properties | Chatham Lodging vs. RLJ Lodging Trust | Chatham Lodging vs. Pebblebrook Hotel Trust | Chatham Lodging vs. Whitestone REIT |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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