Correlation Between Lighthouse Hotel and Citrus Leisure

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

Diversification Opportunities for Lighthouse Hotel and Citrus Leisure

-0.23

Correlation Coefficient

Lighthouse Hotel  Citrus Leisure

Very good diversification

The 3 months correlation between Lighthouse and Citrus is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Lighthouse Hotel PLC and Citrus Leisure PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citrus Leisure 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 Citrus Leisure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citrus Leisure PLC has no effect on the direction of Lighthouse Hotel i.e., Lighthouse Hotel and Citrus Leisure go up and down completely randomly.

Pair Corralation between Lighthouse Hotel and Citrus Leisure

Assuming the 90 days trading horizon Lighthouse Hotel PLC is expected to generate 1.63 times more return on investment than Citrus Leisure. However, Lighthouse Hotel is 1.63 times more volatile than Citrus Leisure PLC. It trades about 0.26 of its potential returns per unit of risk. Citrus Leisure PLC is currently generating about 0.01 per unit of risk. If you would invest  5,480  in Lighthouse Hotel PLC on September 16, 2024 and sell it today you would earn a total of  720.00  from holding Lighthouse Hotel PLC or generate 13.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Lighthouse Hotel PLC  vs.  Citrus Leisure PLC

Lighthouse Hotel PLC

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lighthouse Hotel PLC are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lighthouse Hotel sustained solid returns over the last few months and may actually be approaching a breakup point.

Citrus Leisure PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citrus Leisure PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Citrus Leisure is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lighthouse Hotel and Citrus Leisure

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

The idea behind Lighthouse Hotel PLC and Citrus Leisure 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.