Correlation Between RLJ Lodging and Qurate Retail

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

Diversification Opportunities for RLJ Lodging and Qurate Retail

0.48

Correlation Coefficient

RLJ Lodging  Qurate Retail

Very weak diversification

The 3 months correlation between RLJ and Qurate is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding RLJ Lodging Trust and Qurate Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qurate Retail 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 Qurate Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qurate Retail has no effect on the direction of RLJ Lodging i.e., RLJ Lodging and Qurate Retail go up and down completely randomly.

Pair Corralation between RLJ Lodging and Qurate Retail

Assuming the 90 days trading horizon RLJ Lodging Trust is expected to generate 0.26 times more return on investment than Qurate Retail. However, RLJ Lodging Trust is 3.79 times less risky than Qurate Retail. It trades about 0.05 of its potential returns per unit of risk. Qurate Retail is currently generating about -0.02 per unit of risk. If you would invest  2,451  in RLJ Lodging Trust on March 6, 2024 and sell it today you would earn a total of  38.00  from holding RLJ Lodging Trust or generate 1.55% return on investment over 90 days.

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

RLJ Lodging Trust  vs.  Qurate Retail

RLJ Lodging Trust

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RLJ Lodging Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking indicators, RLJ Lodging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Qurate Retail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Qurate Retail has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Qurate Retail 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 Qurate Retail

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

The idea behind RLJ Lodging Trust and Qurate Retail 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .