Correlation Between Zeder Investments and City Lodge

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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 Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Zeder Investments  vs.  City Lodge Hotels

 Performance 
       Timeline  
Zeder Investments 

Risk-Adjusted Performance

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Over the last 90 days Zeder Investments 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 February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
City Lodge Hotels 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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.
The idea behind Zeder Investments 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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