Correlation Between City Lodge and Redefine Properties
Can any of the company-specific risk be diversified away by investing in both City Lodge and Redefine Properties 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 Redefine Properties 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 Redefine Properties, you can compare the effects of market volatilities on City Lodge and Redefine Properties 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 Redefine Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Lodge and Redefine Properties.
Diversification Opportunities for City Lodge and Redefine Properties
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between City and Redefine is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding City Lodge Hotels and Redefine Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redefine Properties 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 Redefine Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redefine Properties has no effect on the direction of City Lodge i.e., City Lodge and Redefine Properties go up and down completely randomly.
Pair Corralation between City Lodge and Redefine Properties
Assuming the 90 days trading horizon City Lodge is expected to generate 1.7 times less return on investment than Redefine Properties. In addition to that, City Lodge is 1.12 times more volatile than Redefine Properties. It trades about 0.02 of its total potential returns per unit of risk. Redefine Properties is currently generating about 0.04 per unit of volatility. If you would invest 41,100 in Redefine Properties on October 7, 2024 and sell it today you would earn a total of 4,300 from holding Redefine Properties or generate 10.46% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
City Lodge Hotels vs. Redefine Properties
Performance |
Timeline |
City Lodge Hotels |
Redefine Properties |
City Lodge and Redefine Properties Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with City Lodge and Redefine Properties
The main advantage of trading using opposite City Lodge and Redefine Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if City Lodge position performs unexpectedly, Redefine Properties 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 Redefine Properties will offset losses from the drop in Redefine Properties' long position.City Lodge vs. Safari Investments RSA | City Lodge vs. Trematon Capital Investments | City Lodge vs. British American Tobacco | City Lodge vs. AfroCentric Investment Corp |
Redefine Properties vs. Frontier Transport Holdings | Redefine Properties vs. ABSA Bank Limited | Redefine Properties vs. AfroCentric Investment Corp | Redefine Properties vs. HomeChoice Investments |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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