Correlation Between RLJ Lodging and Terreno Realty
Can any of the company-specific risk be diversified away by investing in both RLJ Lodging and Terreno Realty 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 Terreno Realty 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 Terreno Realty, you can compare the effects of market volatilities on RLJ Lodging and Terreno Realty 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 Terreno Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLJ Lodging and Terreno Realty.
Diversification Opportunities for RLJ Lodging and Terreno Realty
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between RLJ and Terreno is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust and Terreno Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terreno Realty 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 Terreno Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terreno Realty has no effect on the direction of RLJ Lodging i.e., RLJ Lodging and Terreno Realty go up and down completely randomly.
Pair Corralation between RLJ Lodging and Terreno Realty
Considering the 90-day investment horizon RLJ Lodging is expected to generate 1.97 times less return on investment than Terreno Realty. In addition to that, RLJ Lodging is 1.11 times more volatile than Terreno Realty. It trades about 0.03 of its total potential returns per unit of risk. Terreno Realty is currently generating about 0.06 per unit of volatility. If you would invest 5,498 in Terreno Realty on September 1, 2024 and sell it today you would earn a total of 565.00 from holding Terreno Realty or generate 10.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RLJ Lodging Trust vs. Terreno Realty
Performance |
| Timeline |
| RLJ Lodging Trust |
| Terreno Realty |
RLJ Lodging and Terreno Realty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RLJ Lodging and Terreno Realty
The main advantage of trading using opposite RLJ Lodging and Terreno Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLJ Lodging position performs unexpectedly, Terreno Realty 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 Terreno Realty will offset losses from the drop in Terreno Realty'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 |
| Terreno Realty vs. Douglas Emmett | Terreno Realty vs. Vornado Realty Trust | Terreno Realty vs. Highwoods Properties | Terreno Realty vs. Piedmont Office Realty |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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