Correlation Between RLJ Lodging and Whitestone REIT

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

Diversification Opportunities for RLJ Lodging and Whitestone REIT

-0.43

Correlation Coefficient

RLJ Lodging  Whitestone REIT

Very good diversification

The 3 months correlation between RLJ and Whitestone is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust and Whitestone REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitestone REIT 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 Whitestone REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitestone REIT has no effect on the direction of RLJ Lodging i.e., RLJ Lodging and Whitestone REIT go up and down completely randomly.

Pair Corralation between RLJ Lodging and Whitestone REIT

Considering the 90-day investment horizon RLJ Lodging Trust is expected to under-perform the Whitestone REIT. In addition to that, RLJ Lodging is 1.3 times more volatile than Whitestone REIT. It trades about -0.12 of its total potential returns per unit of risk. Whitestone REIT is currently generating about 0.03 per unit of volatility. If you would invest  1,412  in Whitestone REIT on December 20, 2024 and sell it today you would earn a total of  24.00  from holding Whitestone REIT or generate 1.7% 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.  Whitestone REIT

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 latest unfluctuating performance, the Stock's essential indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

Whitestone REIT

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Whitestone REIT are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Whitestone REIT is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with RLJ Lodging and Whitestone REIT

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

The idea behind RLJ Lodging Trust and Whitestone REIT 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.