Correlation Between City Lodge and Truworths International

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

Diversification Opportunities for City Lodge and Truworths International

0.94

Correlation Coefficient

City Lodge  Truworths International

Almost no diversification

The 3 months correlation between City and Truworths is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding City Lodge Hotels and Truworths International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truworths International 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 Truworths International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truworths International has no effect on the direction of City Lodge i.e., City Lodge and Truworths International go up and down completely randomly.

Pair Corralation between City Lodge and Truworths International

Assuming the 90 days trading horizon City Lodge Hotels is expected to generate 0.91 times more return on investment than Truworths International. However, City Lodge Hotels is 1.1 times less risky than Truworths International. It trades about -0.24 of its potential returns per unit of risk. Truworths International is currently generating about -0.26 per unit of risk. If you would invest  51,000  in City Lodge Hotels on December 28, 2024 and sell it today you would lose (11,000) from holding City Lodge Hotels or give up 21.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

City Lodge Hotels  vs.  Truworths International

City Lodge Hotels

Risk-Adjusted Performance

Very Weak

Over the last 90 days City Lodge Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Truworths International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Truworths International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with City Lodge and Truworths International

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

The idea behind City Lodge Hotels and Truworths International 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.