Correlation Between GEN Restaurant and RLJ Lodging

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

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

Diversification Opportunities for GEN Restaurant and RLJ Lodging

0.0

Correlation Coefficient

GEN Restaurant  RLJ Lodging

Pay attention - limited upside

The 3 months correlation between GEN and RLJ is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding GEN Restaurant Group, 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 GEN Restaurant 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 GEN Restaurant Group, 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 GEN Restaurant i.e., GEN Restaurant and RLJ Lodging go up and down completely randomly.

Pair Corralation between GEN Restaurant and RLJ Lodging

Given the investment horizon of 90 days GEN Restaurant Group, is expected to under-perform the RLJ Lodging. In addition to that, GEN Restaurant is 2.98 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 0.3 per unit of volatility. If you would invest  909.00  in RLJ Lodging Trust on August 31, 2024 and sell it today you would earn a total of  105.00  from holding RLJ Lodging Trust or generate 11.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

GEN Restaurant Group,  vs.  RLJ Lodging Trust

GEN Restaurant Group,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GEN Restaurant Group, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, GEN Restaurant is not utilizing all of its potentials. The new stock price mess, may contribute to short-term losses for the institutional investors.

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.

Pair Trading with GEN Restaurant and RLJ Lodging

The main advantage of trading using opposite GEN Restaurant and RLJ Lodging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GEN Restaurant 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 GEN Restaurant Group, 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.

Check out your portfolio center.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.