Correlation Between Zeder Investments and City Lodge
Can any of the company-specific risk be diversified away by investing in both Zeder Investments 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 Zeder Investments and City Lodge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Zeder Investments and City Lodge Hotels, you can compare the effects of market volatilities on Zeder Investments 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 Zeder Investments with a short position of City Lodge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zeder Investments and City Lodge.
Diversification Opportunities for Zeder Investments and City Lodge
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Zeder and City is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Zeder Investments 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 Zeder Investments 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 Zeder Investments 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 Zeder Investments i.e., Zeder Investments and City Lodge go up and down completely randomly.
Pair Corralation between Zeder Investments and City Lodge
Assuming the 90 days trading horizon Zeder Investments is expected to generate 1.31 times more return on investment than City Lodge. However, Zeder Investments is 1.31 times more volatile than City Lodge Hotels. It trades about -0.3 of its potential returns per unit of risk. City Lodge Hotels is currently generating about -0.57 per unit of risk. If you would invest 16,100 in Zeder Investments on October 20, 2024 and sell it today you would lose (1,400) from holding Zeder Investments or give up 8.7% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Zeder Investments vs. City Lodge Hotels
Performance |
Timeline |
Zeder Investments |
City Lodge Hotels |
Zeder Investments and City Lodge Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Zeder Investments and City Lodge
The main advantage of trading using opposite Zeder Investments and City Lodge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zeder Investments 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.Zeder Investments vs. Harmony Gold Mining | Zeder Investments vs. Trematon Capital Investments | Zeder Investments vs. Kap Industrial Holdings | Zeder Investments vs. Kumba Iron Ore |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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