Correlation Between RLJ Lodging and Wingstop
Can any of the company-specific risk be diversified away by investing in both RLJ Lodging and Wingstop 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 Wingstop 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 Wingstop, you can compare the effects of market volatilities on RLJ Lodging and Wingstop 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 Wingstop. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLJ Lodging and Wingstop.
Diversification Opportunities for RLJ Lodging and Wingstop
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between RLJ and Wingstop is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust and Wingstop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wingstop 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 Wingstop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wingstop has no effect on the direction of RLJ Lodging i.e., RLJ Lodging and Wingstop go up and down completely randomly.
Pair Corralation between RLJ Lodging and Wingstop
Considering the 90-day investment horizon RLJ Lodging is expected to generate 594.67 times less return on investment than Wingstop. But when comparing it to its historical volatility, RLJ Lodging Trust is 1.5 times less risky than Wingstop. It trades about 0.0 of its potential returns per unit of risk. Wingstop is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 15,807 in Wingstop on September 2, 2024 and sell it today you would earn a total of 17,070 from holding Wingstop or generate 107.99% 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. Wingstop
Performance |
| Timeline |
| RLJ Lodging Trust |
| Wingstop |
RLJ Lodging and Wingstop Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RLJ Lodging and Wingstop
The main advantage of trading using opposite RLJ Lodging and Wingstop positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLJ Lodging position performs unexpectedly, Wingstop 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 Wingstop will offset losses from the drop in Wingstop'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 |
| Wingstop vs. Papa Johns International | Wingstop vs. Chipotle Mexican Grill | Wingstop vs. The Wendys Co | Wingstop vs. Dominos Pizza |
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 CEOs Directory module to screen CEOs from public companies around the world.
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