Correlation Between WideOpenWest and RLJ Lodging

Can any of the company-specific risk be diversified away by investing in both WideOpenWest and RLJ Lodging 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 WideOpenWest and RLJ Lodging into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WideOpenWest and RLJ Lodging Trust, you can compare the effects of market volatilities on WideOpenWest and RLJ Lodging 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 WideOpenWest with a short position of RLJ Lodging. Check out your portfolio center. Please also check ongoing floating volatility patterns of WideOpenWest and RLJ Lodging.

Diversification Opportunities for WideOpenWest and RLJ Lodging

0.32

Correlation Coefficient

WideOpenWest  RLJ Lodging

Weak diversification

The 3 months correlation between WideOpenWest and RLJ is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding WideOpenWest and RLJ Lodging Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RLJ Lodging Trust and WideOpenWest 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 WideOpenWest are associated (or correlated) with RLJ Lodging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RLJ Lodging Trust has no effect on the direction of WideOpenWest i.e., WideOpenWest and RLJ Lodging go up and down completely randomly.

Pair Corralation between WideOpenWest and RLJ Lodging

Considering the 90-day investment horizon WideOpenWest is expected to under-perform the RLJ Lodging. In addition to that, WideOpenWest is 1.26 times more volatile than RLJ Lodging Trust. It trades about -0.08 of its total potential returns per unit of risk. RLJ Lodging Trust is currently generating about -0.09 per unit of volatility. If you would invest  1,006  in RLJ Lodging Trust on November 29, 2024 and sell it today you would lose (88.00) from holding RLJ Lodging Trust or give up 8.75% of portfolio value over 90 days.

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

WideOpenWest  vs.  RLJ Lodging Trust

WideOpenWest

Risk-Adjusted Performance

Very Weak

Over the last 90 days WideOpenWest has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

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.

Pair Trading with WideOpenWest and RLJ Lodging

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

The idea behind WideOpenWest and RLJ Lodging Trust 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.