Correlation Between RLJ Lodging and SoFi Technologies
Can any of the company-specific risk be diversified away by investing in both RLJ Lodging and SoFi 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 SoFi 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 SoFi Technologies, you can compare the effects of market volatilities on RLJ Lodging and SoFi 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 SoFi Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLJ Lodging and SoFi Technologies.
Diversification Opportunities for RLJ Lodging and SoFi Technologies
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RLJ and SoFi is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust and SoFi Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoFi 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 SoFi Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SoFi Technologies has no effect on the direction of RLJ Lodging i.e., RLJ Lodging and SoFi Technologies go up and down completely randomly.
Pair Corralation between RLJ Lodging and SoFi Technologies
Considering the 90-day investment horizon RLJ Lodging is expected to generate 2.64 times less return on investment than SoFi Technologies. But when comparing it to its historical volatility, RLJ Lodging Trust is 1.98 times less risky than SoFi Technologies. It trades about 0.47 of its potential returns per unit of risk. SoFi Technologies is currently generating about 0.63 of returns per unit of risk over similar time horizon. If you would invest 1,104 in SoFi Technologies on September 2, 2024 and sell it today you would earn a total of 537.00 from holding SoFi Technologies or generate 48.64% 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. SoFi Technologies
Performance |
| Timeline |
| RLJ Lodging Trust |
| SoFi Technologies |
RLJ Lodging and SoFi Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RLJ Lodging and SoFi Technologies
The main advantage of trading using opposite RLJ Lodging and SoFi Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLJ Lodging position performs unexpectedly, SoFi 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 SoFi Technologies will offset losses from the drop in SoFi 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 |
| SoFi Technologies vs. Upstart Holdings | SoFi Technologies vs. Affirm Holdings | SoFi Technologies vs. Lucid Group | SoFi Technologies vs. Palantir Technologies Class |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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