Correlation Between RLJ Lodging and Liberty Broadband

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

Diversification Opportunities for RLJ Lodging and Liberty Broadband

-0.72

Correlation Coefficient

RLJ Lodging  Liberty Broadband

Pay attention - limited upside

The 3 months correlation between RLJ and Liberty is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust and Liberty Broadband Srs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Broadband Srs 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 Liberty Broadband. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Broadband Srs has no effect on the direction of RLJ Lodging i.e., RLJ Lodging and Liberty Broadband go up and down completely randomly.

Pair Corralation between RLJ Lodging and Liberty Broadband

Considering the 90-day investment horizon RLJ Lodging Trust is expected to under-perform the Liberty Broadband. But the stock apears to be less risky and, when comparing its historical volatility, RLJ Lodging Trust is 1.08 times less risky than Liberty Broadband. The stock trades about -0.2 of its potential returns per unit of risk. The Liberty Broadband Srs is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  7,472  in Liberty Broadband Srs on December 28, 2024 and sell it today you would earn a total of  1,340  from holding Liberty Broadband Srs or generate 17.93% return on investment over 90 days.

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

RLJ Lodging Trust  vs.  Liberty Broadband Srs

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.

Liberty Broadband Srs

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Broadband Srs are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental indicators, Liberty Broadband disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RLJ Lodging and Liberty Broadband

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

The idea behind RLJ Lodging Trust and Liberty Broadband Srs 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.