Correlation Between City Lodge and Aveng
Can any of the company-specific risk be diversified away by investing in both City Lodge and Aveng 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 City Lodge and Aveng into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between City Lodge Hotels and Aveng, you can compare the effects of market volatilities on City Lodge and Aveng 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 City Lodge with a short position of Aveng. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Lodge and Aveng.
Diversification Opportunities for City Lodge and Aveng
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between City and Aveng is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding City Lodge Hotels and Aveng in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aveng and City Lodge 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 City Lodge Hotels are associated (or correlated) with Aveng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aveng has no effect on the direction of City Lodge i.e., City Lodge and Aveng go up and down completely randomly.
Pair Corralation between City Lodge and Aveng
Assuming the 90 days trading horizon City Lodge is expected to generate 6.94 times less return on investment than Aveng. But when comparing it to its historical volatility, City Lodge Hotels is 1.95 times less risky than Aveng. It trades about 0.07 of its potential returns per unit of risk. Aveng is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 93,500 in Aveng on September 23, 2024 and sell it today you would earn a total of 22,300 from holding Aveng or generate 23.85% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
City Lodge Hotels vs. Aveng
Performance |
Timeline |
City Lodge Hotels |
Aveng |
City Lodge and Aveng Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with City Lodge and Aveng
The main advantage of trading using opposite City Lodge and Aveng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if City Lodge position performs unexpectedly, Aveng 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 Aveng will offset losses from the drop in Aveng's long position.City Lodge vs. Prosus NV | City Lodge vs. Compagnie Financire Richemont | City Lodge vs. British American Tobacco | City Lodge vs. Anglo American PLC |
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 CEOs Directory module to screen CEOs from public companies around the world.
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