Correlation Between City Lodge and Coreshares Index

Can any of the company-specific risk be diversified away by investing in both City Lodge and Coreshares Index 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 Coreshares Index 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 Coreshares Index Tracker, you can compare the effects of market volatilities on City Lodge and Coreshares Index 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 Coreshares Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Lodge and Coreshares Index.

Diversification Opportunities for City Lodge and Coreshares Index

0.7

Correlation Coefficient

City Lodge  Coreshares Index

Poor diversification

The 3 months correlation between City and Coreshares is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding City Lodge Hotels and Coreshares Index Tracker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coreshares Index Tracker 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 Coreshares Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coreshares Index Tracker has no effect on the direction of City Lodge i.e., City Lodge and Coreshares Index go up and down completely randomly.

Pair Corralation between City Lodge and Coreshares Index

Assuming the 90 days trading horizon City Lodge Hotels is expected to generate 1.46 times more return on investment than Coreshares Index. However, City Lodge is 1.46 times more volatile than Coreshares Index Tracker. It trades about 0.15 of its potential returns per unit of risk. Coreshares Index Tracker is currently generating about 0.07 per unit of risk. If you would invest  45,200  in City Lodge Hotels on September 12, 2024 and sell it today you would earn a total of  6,200  from holding City Lodge Hotels or generate 13.72% return on investment over 90 days.

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

City Lodge Hotels  vs.  Coreshares Index Tracker

City Lodge Hotels

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in City Lodge Hotels are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, City Lodge exhibited solid returns over the last few months and may actually be approaching a breakup point.

Coreshares Index Tracker

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Coreshares Index Tracker are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Coreshares Index is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with City Lodge and Coreshares Index

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

The idea behind City Lodge Hotels and Coreshares Index Tracker 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.