Correlation Between RLJ Lodging and Innovative Industrial
Can any of the company-specific risk be diversified away by investing in both RLJ Lodging and Innovative Industrial 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 Innovative Industrial 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 Innovative Industrial Properties, you can compare the effects of market volatilities on RLJ Lodging and Innovative Industrial 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 Innovative Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLJ Lodging and Innovative Industrial.
Diversification Opportunities for RLJ Lodging and Innovative Industrial
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between RLJ and Innovative is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust and Innovative Industrial Properti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovative Industrial 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 Innovative Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovative Industrial has no effect on the direction of RLJ Lodging i.e., RLJ Lodging and Innovative Industrial go up and down completely randomly.
Pair Corralation between RLJ Lodging and Innovative Industrial
Considering the 90-day investment horizon RLJ Lodging is expected to generate 9.19 times less return on investment than Innovative Industrial. But when comparing it to its historical volatility, RLJ Lodging Trust is 1.32 times less risky than Innovative Industrial. It trades about 0.01 of its potential returns per unit of risk. Innovative Industrial Properties is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 6,733 in Innovative Industrial Properties on August 28, 2024 and sell it today you would earn a total of 4,447 from holding Innovative Industrial Properties or generate 66.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
RLJ Lodging Trust vs. Innovative Industrial Properti
Performance |
| Timeline |
| RLJ Lodging Trust |
| Innovative Industrial |
RLJ Lodging and Innovative Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RLJ Lodging and Innovative Industrial
The main advantage of trading using opposite RLJ Lodging and Innovative Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLJ Lodging position performs unexpectedly, Innovative Industrial 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 Innovative Industrial will offset losses from the drop in Innovative Industrial'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 |
| Innovative Industrial vs. Prologis | Innovative Industrial vs. Public Storage | Innovative Industrial vs. Extra Space Storage | Innovative Industrial vs. CubeSmart |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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