Correlation Between RLJ Lodging and Vulcan Materials
Can any of the company-specific risk be diversified away by investing in both RLJ Lodging and Vulcan Materials 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 Vulcan Materials 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 Vulcan Materials, you can compare the effects of market volatilities on RLJ Lodging and Vulcan Materials 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 Vulcan Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLJ Lodging and Vulcan Materials.
Diversification Opportunities for RLJ Lodging and Vulcan Materials
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between RLJ and Vulcan is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials 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 Vulcan Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Materials has no effect on the direction of RLJ Lodging i.e., RLJ Lodging and Vulcan Materials go up and down completely randomly.
Pair Corralation between RLJ Lodging and Vulcan Materials
Assuming the 90 days trading horizon RLJ Lodging Trust is expected to generate 0.24 times more return on investment than Vulcan Materials. However, RLJ Lodging Trust is 4.21 times less risky than Vulcan Materials. It trades about 0.08 of its potential returns per unit of risk. Vulcan Materials is currently generating about -0.11 per unit of risk. If you would invest 2,467 in RLJ Lodging Trust on December 18, 2024 and sell it today you would earn a total of 46.00 from holding RLJ Lodging Trust or generate 1.86% 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. Vulcan Materials
Performance |
Timeline |
RLJ Lodging Trust |
Vulcan Materials |
RLJ Lodging and Vulcan Materials Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with RLJ Lodging and Vulcan Materials
The main advantage of trading using opposite RLJ Lodging and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLJ Lodging position performs unexpectedly, Vulcan Materials 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 Vulcan Materials will offset losses from the drop in Vulcan Materials' long position.RLJ Lodging vs. Diamondrock Hospitality | RLJ Lodging vs. Summit Hotel Properties | RLJ Lodging vs. Pebblebrook Hotel Trust | RLJ Lodging vs. Sunstone Hotel Investors |
Vulcan Materials vs. Eagle Materials | Vulcan Materials vs. CRH PLC ADR | Vulcan Materials vs. Cemex SAB de | Vulcan Materials vs. Martin Marietta Materials |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
Other Complementary Tools
Share Portfolio Track or share privately all of your investments from the convenience of any device | |
Commodity Directory Find actively traded commodities issued by global exchanges | |
Stocks Directory Find actively traded stocks across global markets | |
CEOs Directory Screen CEOs from public companies around the world | |
Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios |