Correlation Between Zhibao Technology and RLJ Lodging

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

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

Diversification Opportunities for Zhibao Technology and RLJ Lodging

0.42

Correlation Coefficient

Zhibao Technology  RLJ Lodging

Very weak diversification

The 3 months correlation between Zhibao and RLJ is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Zhibao Technology Class 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 Zhibao Technology 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 Zhibao Technology Class 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 Zhibao Technology i.e., Zhibao Technology and RLJ Lodging go up and down completely randomly.

Pair Corralation between Zhibao Technology and RLJ Lodging

Given the investment horizon of 90 days Zhibao Technology Class is expected to under-perform the RLJ Lodging. In addition to that, Zhibao Technology is 9.82 times more volatile than RLJ Lodging Trust. It trades about -0.28 of its total potential returns per unit of risk. RLJ Lodging Trust is currently generating about 0.2 per unit of volatility. If you would invest  2,476  in RLJ Lodging Trust on October 11, 2024 and sell it today you would earn a total of  56.00  from holding RLJ Lodging Trust or generate 2.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Zhibao Technology Class  vs.  RLJ Lodging Trust

Zhibao Technology Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhibao Technology Class has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

RLJ Lodging Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RLJ Lodging Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking indicators, RLJ Lodging is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Zhibao Technology and RLJ Lodging

The main advantage of trading using opposite Zhibao Technology and RLJ Lodging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhibao Technology 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 Zhibao Technology Class 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.