Correlation Between City Lodge and Prosus NV
Can any of the company-specific risk be diversified away by investing in both City Lodge and Prosus NV 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 Prosus NV 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 Prosus NV, you can compare the effects of market volatilities on City Lodge and Prosus NV 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 Prosus NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Lodge and Prosus NV.
Diversification Opportunities for City Lodge and Prosus NV
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between City and Prosus is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding City Lodge Hotels and Prosus NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosus NV 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 Prosus NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosus NV has no effect on the direction of City Lodge i.e., City Lodge and Prosus NV go up and down completely randomly.
Pair Corralation between City Lodge and Prosus NV
Assuming the 90 days trading horizon City Lodge is expected to generate 3.56 times less return on investment than Prosus NV. But when comparing it to its historical volatility, City Lodge Hotels is 1.08 times less risky than Prosus NV. It trades about 0.01 of its potential returns per unit of risk. Prosus NV is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 5,678,292 in Prosus NV on September 23, 2024 and sell it today you would earn a total of 1,810,708 from holding Prosus NV or generate 31.89% 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. Prosus NV
Performance |
Timeline |
City Lodge Hotels |
Prosus NV |
City Lodge and Prosus NV Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with City Lodge and Prosus NV
The main advantage of trading using opposite City Lodge and Prosus NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if City Lodge position performs unexpectedly, Prosus NV 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 Prosus NV will offset losses from the drop in Prosus NV'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 |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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