Correlation Between RLJ Lodging and Chipotle Mexican
Can any of the company-specific risk be diversified away by investing in both RLJ Lodging and Chipotle Mexican 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 Chipotle Mexican 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 Chipotle Mexican Grill, you can compare the effects of market volatilities on RLJ Lodging and Chipotle Mexican 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 Chipotle Mexican. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLJ Lodging and Chipotle Mexican.
Diversification Opportunities for RLJ Lodging and Chipotle Mexican
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RLJ and Chipotle is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust and Chipotle Mexican Grill in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chipotle Mexican Grill 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 Chipotle Mexican. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chipotle Mexican Grill has no effect on the direction of RLJ Lodging i.e., RLJ Lodging and Chipotle Mexican go up and down completely randomly.
Pair Corralation between RLJ Lodging and Chipotle Mexican
Considering the 90-day investment horizon RLJ Lodging Trust is expected to generate 0.7 times more return on investment than Chipotle Mexican. However, RLJ Lodging Trust is 1.42 times less risky than Chipotle Mexican. It trades about 0.04 of its potential returns per unit of risk. Chipotle Mexican Grill is currently generating about 0.01 per unit of risk. If you would invest 967.00 in RLJ Lodging Trust on September 2, 2024 and sell it today you would earn a total of 54.00 from holding RLJ Lodging Trust or generate 5.58% 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. Chipotle Mexican Grill
Performance |
| Timeline |
| RLJ Lodging Trust |
| Chipotle Mexican Grill |
RLJ Lodging and Chipotle Mexican Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RLJ Lodging and Chipotle Mexican
The main advantage of trading using opposite RLJ Lodging and Chipotle Mexican positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLJ Lodging position performs unexpectedly, Chipotle Mexican 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 Chipotle Mexican will offset losses from the drop in Chipotle Mexican'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 |
| Chipotle Mexican vs. Starbucks | Chipotle Mexican vs. Dominos Pizza | Chipotle Mexican vs. Yum Brands | Chipotle Mexican vs. The Wendys Co |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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