Correlation Between RLJ Lodging and Coca Cola
Can any of the company-specific risk be diversified away by investing in both RLJ Lodging and Coca Cola 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 Coca Cola 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 Coca Cola Consolidated, you can compare the effects of market volatilities on RLJ Lodging and Coca Cola 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 Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLJ Lodging and Coca Cola.
Diversification Opportunities for RLJ Lodging and Coca Cola
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RLJ and Coca is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust and Coca Cola Consolidated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola Consolidated 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 Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola Consolidated has no effect on the direction of RLJ Lodging i.e., RLJ Lodging and Coca Cola go up and down completely randomly.
Pair Corralation between RLJ Lodging and Coca Cola
Considering the 90-day investment horizon RLJ Lodging Trust is expected to under-perform the Coca Cola. But the stock apears to be less risky and, when comparing its historical volatility, RLJ Lodging Trust is 1.27 times less risky than Coca Cola. The stock trades about -0.01 of its potential returns per unit of risk. The Coca Cola Consolidated is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 50,386 in Coca Cola Consolidated on October 25, 2024 and sell it today you would earn a total of 81,391 from holding Coca Cola Consolidated or generate 161.53% 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. Coca Cola Consolidated
Performance |
| Timeline |
| RLJ Lodging Trust |
| Coca Cola Consolidated |
RLJ Lodging and Coca Cola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RLJ Lodging and Coca Cola
The main advantage of trading using opposite RLJ Lodging and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLJ Lodging position performs unexpectedly, Coca Cola 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 Coca Cola will offset losses from the drop in Coca Cola'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 |
| Coca Cola vs. PepsiCo | Coca Cola vs. Vita Coco | Coca Cola vs. Aquagold International | Coca Cola vs. Thrivent High Yield |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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