Correlation Between RLJ Lodging and Lumen Technologies
Can any of the company-specific risk be diversified away by investing in both RLJ Lodging and Lumen Technologies 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 Lumen Technologies 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 Lumen Technologies, you can compare the effects of market volatilities on RLJ Lodging and Lumen Technologies 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 Lumen Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLJ Lodging and Lumen Technologies.
Diversification Opportunities for RLJ Lodging and Lumen Technologies
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RLJ and Lumen is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust and Lumen Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumen Technologies 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 Lumen Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumen Technologies has no effect on the direction of RLJ Lodging i.e., RLJ Lodging and Lumen Technologies go up and down completely randomly.
Pair Corralation between RLJ Lodging and Lumen Technologies
Considering the 90-day investment horizon RLJ Lodging is expected to generate 894.67 times less return on investment than Lumen Technologies. But when comparing it to its historical volatility, RLJ Lodging Trust is 4.31 times less risky than Lumen Technologies. It trades about 0.0 of its potential returns per unit of risk. Lumen Technologies is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 556.00 in Lumen Technologies on September 2, 2024 and sell it today you would earn a total of 178.00 from holding Lumen Technologies or generate 32.01% 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. Lumen Technologies
Performance |
| Timeline |
| RLJ Lodging Trust |
| Lumen Technologies |
RLJ Lodging and Lumen Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RLJ Lodging and Lumen Technologies
The main advantage of trading using opposite RLJ Lodging and Lumen Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLJ Lodging position performs unexpectedly, Lumen Technologies 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 Lumen Technologies will offset losses from the drop in Lumen Technologies' 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 |
| Lumen Technologies vs. Verizon Communications | Lumen Technologies vs. T Mobile | Lumen Technologies vs. Comcast Corp | Lumen Technologies vs. ATT Inc |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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