Correlation Between LuxUrban Hotels and Soho House

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Can any of the company-specific risk be diversified away by investing in both LuxUrban Hotels and Soho House 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 LuxUrban Hotels and Soho House into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LuxUrban Hotels and Soho House Co, you can compare the effects of market volatilities on LuxUrban Hotels and Soho House 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 LuxUrban Hotels with a short position of Soho House. Check out your portfolio center. Please also check ongoing floating volatility patterns of LuxUrban Hotels and Soho House.

Diversification Opportunities for LuxUrban Hotels and Soho House

-0.45
  Correlation Coefficient

Very good diversification

The 3 months correlation between LuxUrban and Soho is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding LuxUrban Hotels and Soho House Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soho House and LuxUrban 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 LuxUrban Hotels are associated (or correlated) with Soho House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soho House has no effect on the direction of LuxUrban Hotels i.e., LuxUrban Hotels and Soho House go up and down completely randomly.

Pair Corralation between LuxUrban Hotels and Soho House

Given the investment horizon of 90 days LuxUrban Hotels is expected to under-perform the Soho House. In addition to that, LuxUrban Hotels is 7.39 times more volatile than Soho House Co. It trades about -0.44 of its total potential returns per unit of risk. Soho House Co is currently generating about 0.17 per unit of volatility. If you would invest  717.00  in Soho House Co on October 25, 2024 and sell it today you would earn a total of  39.00  from holding Soho House Co or generate 5.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy89.47%
ValuesDaily Returns

LuxUrban Hotels  vs.  Soho House Co

 Performance 
       Timeline  
LuxUrban Hotels 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days LuxUrban Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.
Soho House 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Soho House Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, Soho House displayed solid returns over the last few months and may actually be approaching a breakup point.

LuxUrban Hotels and Soho House Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with LuxUrban Hotels and Soho House

The main advantage of trading using opposite LuxUrban Hotels and Soho House positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LuxUrban Hotels position performs unexpectedly, Soho House 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 Soho House will offset losses from the drop in Soho House's long position.
The idea behind LuxUrban Hotels and Soho House Co 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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