Correlation Between RLJ Lodging and HP

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

Diversification Opportunities for RLJ Lodging and HP

0.73

Correlation Coefficient

RLJ Lodging  HP

Poor diversification

The 3 months correlation between RLJ and HP is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust and HP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HP Inc 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 HP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HP Inc has no effect on the direction of RLJ Lodging i.e., RLJ Lodging and HP go up and down completely randomly.

Pair Corralation between RLJ Lodging and HP

Considering the 90-day investment horizon RLJ Lodging Trust is expected to under-perform the HP. In addition to that, RLJ Lodging is 1.05 times more volatile than HP Inc. It trades about -0.17 of its total potential returns per unit of risk. HP Inc is currently generating about -0.13 per unit of volatility. If you would invest  3,309  in HP Inc on December 25, 2024 and sell it today you would lose (409.00) from holding HP Inc or give up 12.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

RLJ Lodging Trust  vs.  HP Inc

RLJ Lodging Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days RLJ Lodging Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's essential indicators remain relatively steady which may send shares a bit higher in April 2025. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

HP Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days HP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with RLJ Lodging and HP

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

The idea behind RLJ Lodging Trust and HP Inc 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.