Correlation Between Brait SE and City Lodge

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

By analyzing existing cross correlation between Brait SE and City Lodge Hotels, you can compare the effects of market volatilities on Brait SE and City Lodge 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 Brait SE with a short position of City Lodge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brait SE and City Lodge.

Diversification Opportunities for Brait SE and City Lodge

0.68

Correlation Coefficient

Brait SE  City Lodge

Poor diversification

The 3 months correlation between Brait and City is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Brait SE and City Lodge Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Lodge Hotels and Brait SE 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 Brait SE are associated (or correlated) with City Lodge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Lodge Hotels has no effect on the direction of Brait SE i.e., Brait SE and City Lodge go up and down completely randomly.

Pair Corralation between Brait SE and City Lodge

Assuming the 90 days trading horizon Brait SE is expected to generate 0.84 times more return on investment than City Lodge. However, Brait SE is 1.19 times less risky than City Lodge. It trades about 0.02 of its potential returns per unit of risk. City Lodge Hotels is currently generating about -0.23 per unit of risk. If you would invest  20,000  in Brait SE on December 27, 2024 and sell it today you would earn a total of  200.00  from holding Brait SE or generate 1.0% return on investment over 90 days.

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

Brait SE  vs.  City Lodge Hotels

Brait SE

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brait SE are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Brait SE is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

City Lodge Hotels

Risk-Adjusted Performance

Very Weak

Over the last 90 days City Lodge Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Brait SE and City Lodge

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

The idea behind Brait SE and City Lodge Hotels 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 .