Correlation Between RLJ Lodging and JBG SMITH

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

Diversification Opportunities for RLJ Lodging and JBG SMITH

0.18

Correlation Coefficient

RLJ Lodging  JBG SMITH

Average diversification

The 3 months correlation between RLJ and JBG is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust and JBG SMITH Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JBG SMITH Properties 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 JBG SMITH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JBG SMITH Properties has no effect on the direction of RLJ Lodging i.e., RLJ Lodging and JBG SMITH go up and down completely randomly.

Pair Corralation between RLJ Lodging and JBG SMITH

Considering the 90-day investment horizon RLJ Lodging Trust is expected to under-perform the JBG SMITH. But the stock apears to be less risky and, when comparing its historical volatility, RLJ Lodging Trust is 1.24 times less risky than JBG SMITH. The stock trades about -0.18 of its potential returns per unit of risk. The JBG SMITH Properties is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,535  in JBG SMITH Properties on December 26, 2024 and sell it today you would earn a total of  52.00  from holding JBG SMITH Properties or generate 3.39% return on investment over 90 days.

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

RLJ Lodging Trust  vs.  JBG SMITH Properties

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.

JBG SMITH Properties

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JBG SMITH Properties are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, JBG SMITH is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with RLJ Lodging and JBG SMITH

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

The idea behind RLJ Lodging Trust and JBG SMITH Properties 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 Transaction History module to view history of all your transactions and understand their impact on performance.