Correlation Between RLJ Lodging and Lowes Companies
Can any of the company-specific risk be diversified away by investing in both RLJ Lodging and Lowes Companies 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 Lowes Companies 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 Lowes Companies, you can compare the effects of market volatilities on RLJ Lodging and Lowes Companies 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 Lowes Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLJ Lodging and Lowes Companies.
Diversification Opportunities for RLJ Lodging and Lowes Companies
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between RLJ and Lowes is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust and Lowes Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lowes Companies 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 Lowes Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lowes Companies has no effect on the direction of RLJ Lodging i.e., RLJ Lodging and Lowes Companies go up and down completely randomly.
Pair Corralation between RLJ Lodging and Lowes Companies
Considering the 90-day investment horizon RLJ Lodging is expected to generate 3.65 times less return on investment than Lowes Companies. In addition to that, RLJ Lodging is 1.04 times more volatile than Lowes Companies. It trades about 0.04 of its total potential returns per unit of risk. Lowes Companies is currently generating about 0.14 per unit of volatility. If you would invest 21,457 in Lowes Companies on September 2, 2024 and sell it today you would earn a total of 5,786 from holding Lowes Companies or generate 26.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
RLJ Lodging Trust vs. Lowes Companies
Performance |
| Timeline |
| RLJ Lodging Trust |
| Lowes Companies |
RLJ Lodging and Lowes Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RLJ Lodging and Lowes Companies
The main advantage of trading using opposite RLJ Lodging and Lowes Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLJ Lodging position performs unexpectedly, Lowes Companies 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 Lowes Companies will offset losses from the drop in Lowes Companies' 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 |
| Lowes Companies vs. Floor Decor Holdings | Lowes Companies vs. Arhaus Inc | Lowes Companies vs. Haverty Furniture Companies | Lowes Companies vs. Home Depot |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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