Correlation Between RLJ Lodging and Eli Lilly

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

Diversification Opportunities for RLJ Lodging and Eli Lilly

-0.52

Correlation Coefficient

RLJ Lodging  Eli Lilly

Excellent diversification

The 3 months correlation between RLJ and Eli is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly 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 Eli Lilly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eli Lilly has no effect on the direction of RLJ Lodging i.e., RLJ Lodging and Eli Lilly go up and down completely randomly.

Pair Corralation between RLJ Lodging and Eli Lilly

Considering the 90-day investment horizon RLJ Lodging Trust is expected to generate 0.67 times more return on investment than Eli Lilly. However, RLJ Lodging Trust is 1.48 times less risky than Eli Lilly. It trades about 0.17 of its potential returns per unit of risk. Eli Lilly and is currently generating about -0.12 per unit of risk. If you would invest  918.00  in RLJ Lodging Trust on August 31, 2024 and sell it today you would earn a total of  96.00  from holding RLJ Lodging Trust or generate 10.46% return on investment over 90 days.

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

RLJ Lodging Trust  vs.  Eli Lilly and

RLJ Lodging Trust

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RLJ Lodging Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating essential indicators, RLJ Lodging may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Eli Lilly

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eli Lilly and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with RLJ Lodging and Eli Lilly

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

The idea behind RLJ Lodging Trust and Eli Lilly and 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.