Correlation Between RLJ Lodging and Wendys
Can any of the company-specific risk be diversified away by investing in both RLJ Lodging and Wendys 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 Wendys 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 The Wendys Co, you can compare the effects of market volatilities on RLJ Lodging and Wendys 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 Wendys. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLJ Lodging and Wendys.
Diversification Opportunities for RLJ Lodging and Wendys
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between RLJ and Wendys is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust and The Wendys Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Wendys 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 Wendys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Wendys has no effect on the direction of RLJ Lodging i.e., RLJ Lodging and Wendys go up and down completely randomly.
Pair Corralation between RLJ Lodging and Wendys
Considering the 90-day investment horizon RLJ Lodging Trust is expected to generate 1.11 times more return on investment than Wendys. However, RLJ Lodging is 1.11 times more volatile than The Wendys Co. It trades about 0.0 of its potential returns per unit of risk. The Wendys Co is currently generating about -0.01 per unit of risk. If you would invest 1,089 in RLJ Lodging Trust on September 2, 2024 and sell it today you would lose (68.00) from holding RLJ Lodging Trust or give up 6.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RLJ Lodging Trust vs. The Wendys Co
Performance |
| Timeline |
| RLJ Lodging Trust |
| The Wendys |
RLJ Lodging and Wendys Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RLJ Lodging and Wendys
The main advantage of trading using opposite RLJ Lodging and Wendys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLJ Lodging position performs unexpectedly, Wendys 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 Wendys will offset losses from the drop in Wendys' 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 |
| Wendys vs. Yum Brands | Wendys vs. Dominos Pizza | Wendys vs. Darden Restaurants | Wendys vs. Papa Johns International |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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