Correlation Between RLJ Lodging and Verizon Communications
Can any of the company-specific risk be diversified away by investing in both RLJ Lodging and Verizon Communications 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 Verizon Communications 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 Verizon Communications, you can compare the effects of market volatilities on RLJ Lodging and Verizon Communications 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 Verizon Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLJ Lodging and Verizon Communications.
Diversification Opportunities for RLJ Lodging and Verizon Communications
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between RLJ and Verizon is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 Verizon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of RLJ Lodging i.e., RLJ Lodging and Verizon Communications go up and down completely randomly.
Pair Corralation between RLJ Lodging and Verizon Communications
Considering the 90-day investment horizon RLJ Lodging Trust is expected to under-perform the Verizon Communications. In addition to that, RLJ Lodging is 1.17 times more volatile than Verizon Communications. It trades about -0.36 of its total potential returns per unit of risk. Verizon Communications is currently generating about 0.33 per unit of volatility. If you would invest 4,040 in Verizon Communications on November 29, 2024 and sell it today you would earn a total of 278.00 from holding Verizon Communications or generate 6.88% 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. Verizon Communications
Performance |
| Timeline |
| RLJ Lodging Trust |
| Verizon Communications |
RLJ Lodging and Verizon Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RLJ Lodging and Verizon Communications
The main advantage of trading using opposite RLJ Lodging and Verizon Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLJ Lodging position performs unexpectedly, Verizon Communications 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 Verizon Communications will offset losses from the drop in Verizon Communications' 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 |
| Verizon Communications vs. T Mobile | Verizon Communications vs. Lumen Technologies | Verizon Communications vs. Comcast Corp | Verizon Communications vs. ATT Inc |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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