Correlation Between IKEJA HOTELS and FIDELITY BANK

Can any of the company-specific risk be diversified away by investing in both IKEJA HOTELS and FIDELITY BANK 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 IKEJA HOTELS and FIDELITY BANK into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between IKEJA HOTELS PLC and FIDELITY BANK PLC, you can compare the effects of market volatilities on IKEJA HOTELS and FIDELITY BANK 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 IKEJA HOTELS with a short position of FIDELITY BANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of IKEJA HOTELS and FIDELITY BANK.

Diversification Opportunities for IKEJA HOTELS and FIDELITY BANK

0.86

Correlation Coefficient

IKEJA HOTELS  FIDELITY BANK

Very poor diversification

The 3 months correlation between IKEJA and FIDELITY is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding IKEJA HOTELS PLC and FIDELITY BANK PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIDELITY BANK PLC and IKEJA HOTELS 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 IKEJA HOTELS PLC are associated (or correlated) with FIDELITY BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIDELITY BANK PLC has no effect on the direction of IKEJA HOTELS i.e., IKEJA HOTELS and FIDELITY BANK go up and down completely randomly.

Pair Corralation between IKEJA HOTELS and FIDELITY BANK

Assuming the 90 days trading horizon IKEJA HOTELS PLC is expected to generate 2.19 times more return on investment than FIDELITY BANK. However, IKEJA HOTELS is 2.19 times more volatile than FIDELITY BANK PLC. It trades about 0.24 of its potential returns per unit of risk. FIDELITY BANK PLC is currently generating about 0.22 per unit of risk. If you would invest  770.00  in IKEJA HOTELS PLC on October 22, 2024 and sell it today you would earn a total of  580.00  from holding IKEJA HOTELS PLC or generate 75.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

IKEJA HOTELS PLC  vs.  FIDELITY BANK PLC

IKEJA HOTELS PLC

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IKEJA HOTELS PLC are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, IKEJA HOTELS displayed solid returns over the last few months and may actually be approaching a breakup point.

FIDELITY BANK PLC

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FIDELITY BANK PLC are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental drivers, FIDELITY BANK unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IKEJA HOTELS and FIDELITY BANK

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

The idea behind IKEJA HOTELS PLC and FIDELITY BANK PLC 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.

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.