Correlation Between InnSuites Hospitality and RLJ Lodging

Can any of the company-specific risk be diversified away by investing in both InnSuites Hospitality and RLJ Lodging 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 InnSuites Hospitality and RLJ Lodging into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between InnSuites Hospitality Trust and RLJ Lodging Trust, you can compare the effects of market volatilities on InnSuites Hospitality and RLJ Lodging 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 InnSuites Hospitality with a short position of RLJ Lodging. Check out your portfolio center. Please also check ongoing floating volatility patterns of InnSuites Hospitality and RLJ Lodging.

Diversification Opportunities for InnSuites Hospitality and RLJ Lodging

0.84

Correlation Coefficient

InnSuites Hospitality  RLJ Lodging

Very poor diversification

The 3 months correlation between InnSuites and RLJ is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding InnSuites Hospitality Trust and RLJ Lodging Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RLJ Lodging Trust and InnSuites Hospitality 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 InnSuites Hospitality Trust are associated (or correlated) with RLJ Lodging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RLJ Lodging Trust has no effect on the direction of InnSuites Hospitality i.e., InnSuites Hospitality and RLJ Lodging go up and down completely randomly.

Pair Corralation between InnSuites Hospitality and RLJ Lodging

Considering the 90-day investment horizon InnSuites Hospitality Trust is expected to generate 42.59 times more return on investment than RLJ Lodging. However, InnSuites Hospitality is 42.59 times more volatile than RLJ Lodging Trust. It trades about 0.06 of its potential returns per unit of risk. RLJ Lodging Trust is currently generating about -0.02 per unit of risk. If you would invest  135.00  in InnSuites Hospitality Trust on October 9, 2024 and sell it today you would earn a total of  124.00  from holding InnSuites Hospitality Trust or generate 91.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.6%
Values	Daily Returns

InnSuites Hospitality Trust  vs.  RLJ Lodging Trust

InnSuites Hospitality

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in InnSuites Hospitality Trust are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical indicators, InnSuites Hospitality unveiled solid returns over the last few months and may actually be approaching a breakup point.

RLJ Lodging Trust

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RLJ Lodging Trust are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating essential indicators, RLJ Lodging may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with InnSuites Hospitality and RLJ Lodging

The main advantage of trading using opposite InnSuites Hospitality and RLJ Lodging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InnSuites Hospitality position performs unexpectedly, RLJ Lodging 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 RLJ Lodging will offset losses from the drop in RLJ Lodging's long position.

The idea behind InnSuites Hospitality Trust and RLJ Lodging Trust pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.