Correlation Between RLJ Lodging and Walmart
Can any of the company-specific risk be diversified away by investing in both RLJ Lodging and Walmart 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 Walmart 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 Walmart, you can compare the effects of market volatilities on RLJ Lodging and Walmart 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 Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLJ Lodging and Walmart.
Diversification Opportunities for RLJ Lodging and Walmart
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RLJ and Walmart is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of RLJ Lodging i.e., RLJ Lodging and Walmart go up and down completely randomly.
Pair Corralation between RLJ Lodging and Walmart
Considering the 90-day investment horizon RLJ Lodging Trust is expected to under-perform the Walmart. In addition to that, RLJ Lodging is 1.39 times more volatile than Walmart. It trades about -0.08 of its total potential returns per unit of risk. Walmart is currently generating about 0.42 per unit of volatility. If you would invest 9,078 in Walmart on November 4, 2024 and sell it today you would earn a total of 738.00 from holding Walmart or generate 8.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RLJ Lodging Trust vs. Walmart
Performance |
| Timeline |
| RLJ Lodging Trust |
| Walmart |
RLJ Lodging and Walmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RLJ Lodging and Walmart
The main advantage of trading using opposite RLJ Lodging and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLJ Lodging position performs unexpectedly, Walmart 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 Walmart will offset losses from the drop in Walmart'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 |
| Walmart vs. Costco Wholesale Corp | Walmart vs. Dollar Tree | Walmart vs. BJs Wholesale Club | Walmart vs. Target |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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