Correlation Between RLJ Lodging and QRTEB Old

Can any of the company-specific risk be diversified away by investing in both RLJ Lodging and QRTEB Old 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 QRTEB Old 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 QRTEB Old, you can compare the effects of market volatilities on RLJ Lodging and QRTEB Old 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 QRTEB Old. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLJ Lodging and QRTEB Old.

Diversification Opportunities for RLJ Lodging and QRTEB Old

-0.14

Correlation Coefficient

RLJ Lodging  QRTEB Old

Good diversification

The 3 months correlation between RLJ and QRTEB is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust and QRTEB Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QRTEB Old 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 QRTEB Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QRTEB Old has no effect on the direction of RLJ Lodging i.e., RLJ Lodging and QRTEB Old go up and down completely randomly.

Pair Corralation between RLJ Lodging and QRTEB Old

Assuming the 90 days trading horizon RLJ Lodging Trust is expected to generate 0.07 times more return on investment than QRTEB Old. However, RLJ Lodging Trust is 14.37 times less risky than QRTEB Old. It trades about 0.07 of its potential returns per unit of risk. QRTEB Old is currently generating about -0.2 per unit of risk. If you would invest  2,473  in RLJ Lodging Trust on December 29, 2024 and sell it today you would earn a total of  35.00  from holding RLJ Lodging Trust or generate 1.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	60.66%
Values	Daily Returns

RLJ Lodging Trust  vs.  QRTEB Old

RLJ Lodging Trust

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RLJ Lodging Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking indicators, RLJ Lodging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

QRTEB Old

Risk-Adjusted Performance

Very Weak

Over the last 90 days QRTEB Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with RLJ Lodging and QRTEB Old

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

The idea behind RLJ Lodging Trust and QRTEB Old 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.

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.