Correlation Between CAVA Group, and LuxUrban Hotels

Can any of the company-specific risk be diversified away by investing in both CAVA Group, and LuxUrban Hotels 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 CAVA Group, and LuxUrban Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for CAVA Group, and LuxUrban Hotels

0.14

Correlation Coefficient

CAVA Group,  LuxUrban Hotels

Average diversification

The 3 months correlation between CAVA and LuxUrban is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding CAVA Group, and LuxUrban Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LuxUrban Hotels and CAVA Group, 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 CAVA Group, are associated (or correlated) with LuxUrban Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LuxUrban Hotels has no effect on the direction of CAVA Group, i.e., CAVA Group, and LuxUrban Hotels go up and down completely randomly.

Pair Corralation between CAVA Group, and LuxUrban Hotels

Given the investment horizon of 90 days CAVA Group, is expected to under-perform the LuxUrban Hotels. But the stock apears to be less risky and, when comparing its historical volatility, CAVA Group, is 4.9 times less risky than LuxUrban Hotels. The stock trades about -0.41 of its potential returns per unit of risk. The LuxUrban Hotels is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  83.00  in LuxUrban Hotels on October 7, 2024 and sell it today you would earn a total of  8.00  from holding LuxUrban Hotels or generate 9.64% return on investment over 90 days.

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

CAVA Group,  vs.  LuxUrban Hotels

CAVA Group,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CAVA Group, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

LuxUrban Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LuxUrban Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with CAVA Group, and LuxUrban Hotels

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

The idea behind CAVA Group, and LuxUrban 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.