Correlation Between RLJ Lodging and Gilead Sciences
Can any of the company-specific risk be diversified away by investing in both RLJ Lodging and Gilead Sciences 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 Gilead Sciences 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 Gilead Sciences, you can compare the effects of market volatilities on RLJ Lodging and Gilead Sciences 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 Gilead Sciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLJ Lodging and Gilead Sciences.
Diversification Opportunities for RLJ Lodging and Gilead Sciences
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RLJ and Gilead is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust and Gilead Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gilead Sciences 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 Gilead Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gilead Sciences has no effect on the direction of RLJ Lodging i.e., RLJ Lodging and Gilead Sciences go up and down completely randomly.
Pair Corralation between RLJ Lodging and Gilead Sciences
Considering the 90-day investment horizon RLJ Lodging Trust is expected to under-perform the Gilead Sciences. In addition to that, RLJ Lodging is 1.36 times more volatile than Gilead Sciences. It trades about -0.1 of its total potential returns per unit of risk. Gilead Sciences is currently generating about -0.05 per unit of volatility. If you would invest 9,395 in Gilead Sciences on October 25, 2024 and sell it today you would lose (91.00) from holding Gilead Sciences or give up 0.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RLJ Lodging Trust vs. Gilead Sciences
Performance |
| Timeline |
| RLJ Lodging Trust |
| Gilead Sciences |
RLJ Lodging and Gilead Sciences Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RLJ Lodging and Gilead Sciences
The main advantage of trading using opposite RLJ Lodging and Gilead Sciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLJ Lodging position performs unexpectedly, Gilead Sciences 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 Gilead Sciences will offset losses from the drop in Gilead Sciences' 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 |
| Gilead Sciences vs. Pfizer Inc | Gilead Sciences vs. Johnson Johnson | Gilead Sciences vs. Bank of America | Gilead Sciences vs. RLJ Lodging Trust |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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