Correlation Between RLJ Lodging and Suncor Energy
Can any of the company-specific risk be diversified away by investing in both RLJ Lodging and Suncor Energy 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 Suncor Energy 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 Suncor Energy, you can compare the effects of market volatilities on RLJ Lodging and Suncor Energy 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 Suncor Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLJ Lodging and Suncor Energy.
Diversification Opportunities for RLJ Lodging and Suncor Energy
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between RLJ and Suncor is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust and Suncor Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suncor Energy 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 Suncor Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suncor Energy has no effect on the direction of RLJ Lodging i.e., RLJ Lodging and Suncor Energy go up and down completely randomly.
Pair Corralation between RLJ Lodging and Suncor Energy
Considering the 90-day investment horizon RLJ Lodging Trust is expected to generate 1.02 times more return on investment than Suncor Energy. However, RLJ Lodging is 1.02 times more volatile than Suncor Energy. It trades about 0.1 of its potential returns per unit of risk. Suncor Energy is currently generating about 0.01 per unit of risk. If you would invest 926.00 in RLJ Lodging Trust on September 2, 2024 and sell it today you would earn a total of 95.00 from holding RLJ Lodging Trust or generate 10.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
RLJ Lodging Trust vs. Suncor Energy
Performance |
| Timeline |
| RLJ Lodging Trust |
| Suncor Energy |
RLJ Lodging and Suncor Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RLJ Lodging and Suncor Energy
The main advantage of trading using opposite RLJ Lodging and Suncor Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLJ Lodging position performs unexpectedly, Suncor Energy 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 Suncor Energy will offset losses from the drop in Suncor Energy'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 |
| Suncor Energy vs. Shell PLC ADR | Suncor Energy vs. Equinor ASA ADR | Suncor Energy vs. Petrleo Brasileiro SA |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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