Correlation Between City Lodge and Firstrand
Can any of the company-specific risk be diversified away by investing in both City Lodge and Firstrand 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 Firstrand 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 Firstrand, you can compare the effects of market volatilities on City Lodge and Firstrand 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 Firstrand. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Lodge and Firstrand.
Diversification Opportunities for City Lodge and Firstrand
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between City and Firstrand is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding City Lodge Hotels and Firstrand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firstrand 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 Firstrand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firstrand has no effect on the direction of City Lodge i.e., City Lodge and Firstrand go up and down completely randomly.
Pair Corralation between City Lodge and Firstrand
Assuming the 90 days trading horizon City Lodge Hotels is expected to generate 1.18 times more return on investment than Firstrand. However, City Lodge is 1.18 times more volatile than Firstrand. It trades about 0.08 of its potential returns per unit of risk. Firstrand is currently generating about 0.08 per unit of risk. If you would invest 41,600 in City Lodge Hotels on September 24, 2024 and sell it today you would earn a total of 9,400 from holding City Lodge Hotels or generate 22.6% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
City Lodge Hotels vs. Firstrand
Performance |
Timeline |
City Lodge Hotels |
Firstrand |
City Lodge and Firstrand Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with City Lodge and Firstrand
The main advantage of trading using opposite City Lodge and Firstrand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if City Lodge position performs unexpectedly, Firstrand 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 Firstrand will offset losses from the drop in Firstrand's long position.City Lodge vs. Capitec Bank Holdings | City Lodge vs. Astoria Investments | City Lodge vs. Kumba Iron Ore | City Lodge vs. Ascendis Health |
Firstrand vs. Allied Electronics | Firstrand vs. RMB Holdings | Firstrand vs. Avi | Firstrand vs. City Lodge Hotels |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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