Correlation Between Schroder European and City Lodge

Can any of the company-specific risk be diversified away by investing in both Schroder European and City Lodge 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 Schroder European and City Lodge into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Schroder European Real and City Lodge Hotels, you can compare the effects of market volatilities on Schroder European and City Lodge 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 Schroder European with a short position of City Lodge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Schroder European and City Lodge.

Diversification Opportunities for Schroder European and City Lodge

-0.27

Correlation Coefficient

Schroder European  City Lodge

Very good diversification

The 3 months correlation between Schroder and City is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Schroder European Real and City Lodge Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Lodge Hotels and Schroder European 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 Schroder European Real are associated (or correlated) with City Lodge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Lodge Hotels has no effect on the direction of Schroder European i.e., Schroder European and City Lodge go up and down completely randomly.

Pair Corralation between Schroder European and City Lodge

Assuming the 90 days trading horizon Schroder European Real is expected to generate 0.0 times more return on investment than City Lodge. However, Schroder European Real is 869.33 times less risky than City Lodge. It trades about 0.11 of its potential returns per unit of risk. City Lodge Hotels is currently generating about -0.24 per unit of risk. If you would invest  199,372  in Schroder European Real on December 28, 2024 and sell it today you would earn a total of  28.00  from holding Schroder European Real or generate 0.01% return on investment over 90 days.

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

Schroder European Real  vs.  City Lodge Hotels

Schroder European Real

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Schroder European Real are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Schroder European is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

City Lodge Hotels

Risk-Adjusted Performance

Very Weak

Over the last 90 days City Lodge Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Schroder European and City Lodge

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

The idea behind Schroder European Real and City Lodge Hotels 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.