Correlation Between Harrow Health and RLJ Lodging

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

By analyzing existing cross correlation between Harrow Health 8625 and RLJ Lodging Trust, you can compare the effects of market volatilities on Harrow Health 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 Harrow Health with a short position of RLJ Lodging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harrow Health and RLJ Lodging.

Diversification Opportunities for Harrow Health and RLJ Lodging

0.83

Correlation Coefficient

Harrow Health  RLJ Lodging

Very poor diversification

The 3 months correlation between Harrow and RLJ is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Harrow Health 8625 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 Harrow Health 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 Harrow Health 8625 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 Harrow Health i.e., Harrow Health and RLJ Lodging go up and down completely randomly.

Pair Corralation between Harrow Health and RLJ Lodging

Assuming the 90 days horizon Harrow Health is expected to generate 1.31 times less return on investment than RLJ Lodging. In addition to that, Harrow Health is 1.06 times more volatile than RLJ Lodging Trust. It trades about 0.07 of its total potential returns per unit of risk. RLJ Lodging Trust is currently generating about 0.1 per unit of volatility. If you would invest  1,919  in RLJ Lodging Trust on July 19, 2024 and sell it today you would earn a total of  693.00  from holding RLJ Lodging Trust or generate 36.11% return on investment over 90 days.

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

Harrow Health 8625  vs.  RLJ Lodging Trust

Harrow Health 8625

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Harrow Health 8625 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Harrow Health is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

RLJ Lodging Trust

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RLJ Lodging Trust are ranked lower than 11 (%) 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.

Pair Trading with Harrow Health and RLJ Lodging

The main advantage of trading using opposite Harrow Health and RLJ Lodging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harrow Health 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 Harrow Health 8625 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.