Correlation Between RLJ Lodging and Park Hotels
Can any of the company-specific risk be diversified away by investing in both RLJ Lodging and Park Hotels 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 Park Hotels 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 Park Hotels Resorts, you can compare the effects of market volatilities on RLJ Lodging and Park Hotels 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 Park Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLJ Lodging and Park Hotels.
Diversification Opportunities for RLJ Lodging and Park Hotels
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RLJ and Park is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust and Park Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Hotels Resorts 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 Park Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Park Hotels Resorts has no effect on the direction of RLJ Lodging i.e., RLJ Lodging and Park Hotels go up and down completely randomly.
Pair Corralation between RLJ Lodging and Park Hotels
Considering the 90-day investment horizon RLJ Lodging Trust is expected to generate 0.92 times more return on investment than Park Hotels. However, RLJ Lodging Trust is 1.08 times less risky than Park Hotels. It trades about -0.14 of its potential returns per unit of risk. Park Hotels Resorts is currently generating about -0.21 per unit of risk. If you would invest 991.00 in RLJ Lodging Trust on November 18, 2024 and sell it today you would lose (35.00) from holding RLJ Lodging Trust or give up 3.53% 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. Park Hotels Resorts
Performance |
| Timeline |
| RLJ Lodging Trust |
| Park Hotels Resorts |
RLJ Lodging and Park Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RLJ Lodging and Park Hotels
The main advantage of trading using opposite RLJ Lodging and Park Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLJ Lodging position performs unexpectedly, Park Hotels 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 Park Hotels will offset losses from the drop in Park Hotels' 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 |
| Park Hotels vs. Diamondrock Hospitality | Park Hotels vs. Ryman Hospitality Properties | Park Hotels vs. Pebblebrook Hotel Trust | Park Hotels vs. Sunstone Hotel Investors |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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