Correlation Between City Lodge and Rex Trueform
Can any of the company-specific risk be diversified away by investing in both City Lodge and Rex Trueform 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 Rex Trueform 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 Rex Trueform Group, you can compare the effects of market volatilities on City Lodge and Rex Trueform 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 Rex Trueform. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Lodge and Rex Trueform.
Diversification Opportunities for City Lodge and Rex Trueform
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between City and Rex is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding City Lodge Hotels and Rex Trueform Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rex Trueform Group 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 Rex Trueform. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rex Trueform Group has no effect on the direction of City Lodge i.e., City Lodge and Rex Trueform go up and down completely randomly.
Pair Corralation between City Lodge and Rex Trueform
Assuming the 90 days trading horizon City Lodge Hotels is expected to generate 2.23 times more return on investment than Rex Trueform. However, City Lodge is 2.23 times more volatile than Rex Trueform Group. It trades about 0.07 of its potential returns per unit of risk. Rex Trueform Group is currently generating about 0.07 per unit of risk. If you would invest 49,500 in City Lodge Hotels on September 23, 2024 and sell it today you would earn a total of 1,500 from holding City Lodge Hotels or generate 3.03% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 97.67% |
Values | Daily Returns |
City Lodge Hotels vs. Rex Trueform Group
Performance |
Timeline |
City Lodge Hotels |
Rex Trueform Group |
City Lodge and Rex Trueform Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with City Lodge and Rex Trueform
The main advantage of trading using opposite City Lodge and Rex Trueform positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if City Lodge position performs unexpectedly, Rex Trueform 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 Rex Trueform will offset losses from the drop in Rex Trueform'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 |
Rex Trueform vs. Mr Price Group | Rex Trueform vs. Truworths International | Rex Trueform vs. Rex Trueform Group | Rex Trueform vs. Brait SE |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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