Correlation Between Lighthouse Hotel and Jat Holdings

Can any of the company-specific risk be diversified away by investing in both Lighthouse Hotel and Jat Holdings 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 Lighthouse Hotel and Jat Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Lighthouse Hotel and Jat Holdings

0.71

Correlation Coefficient

Lighthouse Hotel  Jat Holdings

Poor diversification

The 3 months correlation between Lighthouse and Jat is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Lighthouse Hotel PLC and Jat Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jat Holdings PLC and Lighthouse Hotel 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 Lighthouse Hotel PLC are associated (or correlated) with Jat Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jat Holdings PLC has no effect on the direction of Lighthouse Hotel i.e., Lighthouse Hotel and Jat Holdings go up and down completely randomly.

Pair Corralation between Lighthouse Hotel and Jat Holdings

Assuming the 90 days trading horizon Lighthouse Hotel is expected to generate 4.95 times less return on investment than Jat Holdings. In addition to that, Lighthouse Hotel is 1.08 times more volatile than Jat Holdings PLC. It trades about 0.03 of its total potential returns per unit of risk. Jat Holdings PLC is currently generating about 0.16 per unit of volatility. If you would invest  2,230  in Jat Holdings PLC on December 4, 2024 and sell it today you would earn a total of  470.00  from holding Jat Holdings PLC or generate 21.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.25%
Values	Daily Returns

Lighthouse Hotel PLC  vs.  Jat Holdings PLC

Lighthouse Hotel PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lighthouse Hotel PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Lighthouse Hotel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Jat Holdings PLC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jat Holdings PLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jat Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lighthouse Hotel and Jat Holdings

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

The idea behind Lighthouse Hotel PLC and Jat Holdings 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.