Correlation Between Lighthouse Hotel and THE KINGSBURY

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

Diversification Opportunities for Lighthouse Hotel and THE KINGSBURY

0.92

Correlation Coefficient

Lighthouse Hotel  THE KINGSBURY

Almost no diversification

The 3 months correlation between Lighthouse and THE is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Lighthouse Hotel PLC and THE KINGSBURY PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THE KINGSBURY 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 THE KINGSBURY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THE KINGSBURY PLC has no effect on the direction of Lighthouse Hotel i.e., Lighthouse Hotel and THE KINGSBURY go up and down completely randomly.

Pair Corralation between Lighthouse Hotel and THE KINGSBURY

Assuming the 90 days trading horizon Lighthouse Hotel PLC is expected to generate 1.46 times more return on investment than THE KINGSBURY. However, Lighthouse Hotel is 1.46 times more volatile than THE KINGSBURY PLC. It trades about 0.08 of its potential returns per unit of risk. THE KINGSBURY PLC is currently generating about 0.06 per unit of risk. If you would invest  2,780  in Lighthouse Hotel PLC on October 24, 2024 and sell it today you would earn a total of  3,600  from holding Lighthouse Hotel PLC or generate 129.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	90.41%
Values	Daily Returns

Lighthouse Hotel PLC  vs.  THE KINGSBURY PLC

Lighthouse Hotel PLC

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lighthouse Hotel PLC are ranked lower than 15 (%) 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.

THE KINGSBURY PLC

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in THE KINGSBURY PLC are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, THE KINGSBURY sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lighthouse Hotel and THE KINGSBURY

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

The idea behind Lighthouse Hotel PLC and THE KINGSBURY 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.