Correlation Between RLJ Lodging and Liberty Global
Can any of the company-specific risk be diversified away by investing in both RLJ Lodging and Liberty Global 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 Liberty Global 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 Liberty Global PLC, you can compare the effects of market volatilities on RLJ Lodging and Liberty Global 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 Liberty Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLJ Lodging and Liberty Global.
Diversification Opportunities for RLJ Lodging and Liberty Global
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RLJ and Liberty is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust and Liberty Global PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Global PLC 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 Liberty Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Global PLC has no effect on the direction of RLJ Lodging i.e., RLJ Lodging and Liberty Global go up and down completely randomly.
Pair Corralation between RLJ Lodging and Liberty Global
Considering the 90-day investment horizon RLJ Lodging is expected to generate 3.48 times less return on investment than Liberty Global. But when comparing it to its historical volatility, RLJ Lodging Trust is 1.32 times less risky than Liberty Global. It trades about 0.1 of its potential returns per unit of risk. Liberty Global PLC is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 992.00 in Liberty Global PLC on September 2, 2024 and sell it today you would earn a total of 421.00 from holding Liberty Global PLC or generate 42.44% 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. Liberty Global PLC
Performance |
| Timeline |
| RLJ Lodging Trust |
| Liberty Global PLC |
RLJ Lodging and Liberty Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RLJ Lodging and Liberty Global
The main advantage of trading using opposite RLJ Lodging and Liberty Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLJ Lodging position performs unexpectedly, Liberty Global 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 Liberty Global will offset losses from the drop in Liberty Global'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 |
| Liberty Global vs. Liberty Global PLC | Liberty Global vs. Liberty Latin America | Liberty Global vs. Liberty Latin America | Liberty Global vs. Liberty Broadband Srs |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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