Correlation Between RLJ Lodging and Sunstone Hotel
Can any of the company-specific risk be diversified away by investing in both RLJ Lodging and Sunstone Hotel 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 Sunstone Hotel 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 Sunstone Hotel Investors, you can compare the effects of market volatilities on RLJ Lodging and Sunstone Hotel 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 Sunstone Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLJ Lodging and Sunstone Hotel.
Diversification Opportunities for RLJ Lodging and Sunstone Hotel
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RLJ and Sunstone is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust and Sunstone Hotel Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunstone Hotel Investors 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 Sunstone Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunstone Hotel Investors has no effect on the direction of RLJ Lodging i.e., RLJ Lodging and Sunstone Hotel go up and down completely randomly.
Pair Corralation between RLJ Lodging and Sunstone Hotel
Considering the 90-day investment horizon RLJ Lodging Trust is expected to generate 1.13 times more return on investment than Sunstone Hotel. However, RLJ Lodging is 1.13 times more volatile than Sunstone Hotel Investors. It trades about 0.05 of its potential returns per unit of risk. Sunstone Hotel Investors is currently generating about -0.01 per unit of risk. If you would invest 938.00 in RLJ Lodging Trust on August 23, 2024 and sell it today you would earn a total of 42.00 from holding RLJ Lodging Trust or generate 4.48% 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. Sunstone Hotel Investors
Performance |
| Timeline |
| RLJ Lodging Trust |
| Sunstone Hotel Investors |
RLJ Lodging and Sunstone Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RLJ Lodging and Sunstone Hotel
The main advantage of trading using opposite RLJ Lodging and Sunstone Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLJ Lodging position performs unexpectedly, Sunstone Hotel 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 Sunstone Hotel will offset losses from the drop in Sunstone Hotel'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 |
| Sunstone Hotel vs. RLJ Lodging Trust | Sunstone Hotel vs. Pebblebrook Hotel Trust | Sunstone Hotel vs. Summit Hotel Properties | Sunstone Hotel vs. Ryman Hospitality Properties |
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 Stocks Directory module to find actively traded stocks across global markets.
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