Correlation Between CAVELL TOURISTIC and LUX ISLAND

Can any of the company-specific risk be diversified away by investing in both CAVELL TOURISTIC and LUX ISLAND 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 CAVELL TOURISTIC and LUX ISLAND into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CAVELL TOURISTIC INVESTMENTS and LUX ISLAND RESORTS, you can compare the effects of market volatilities on CAVELL TOURISTIC and LUX ISLAND 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 CAVELL TOURISTIC with a short position of LUX ISLAND. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAVELL TOURISTIC and LUX ISLAND.

Diversification Opportunities for CAVELL TOURISTIC and LUX ISLAND

0.8

Correlation Coefficient

CAVELL TOURISTIC  LUX ISLAND

Very poor diversification

The 3 months correlation between CAVELL and LUX is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding CAVELL TOURISTIC INVESTMENTS and LUX ISLAND RESORTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LUX ISLAND RESORTS and CAVELL TOURISTIC 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 CAVELL TOURISTIC INVESTMENTS are associated (or correlated) with LUX ISLAND. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LUX ISLAND RESORTS has no effect on the direction of CAVELL TOURISTIC i.e., CAVELL TOURISTIC and LUX ISLAND go up and down completely randomly.

Pair Corralation between CAVELL TOURISTIC and LUX ISLAND

Assuming the 90 days trading horizon CAVELL TOURISTIC INVESTMENTS is expected to under-perform the LUX ISLAND. In addition to that, CAVELL TOURISTIC is 1.83 times more volatile than LUX ISLAND RESORTS. It trades about -0.18 of its total potential returns per unit of risk. LUX ISLAND RESORTS is currently generating about -0.11 per unit of volatility. If you would invest  5,950  in LUX ISLAND RESORTS on September 12, 2024 and sell it today you would lose (700.00) from holding LUX ISLAND RESORTS or give up 11.76% of portfolio value over 90 days.

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

CAVELL TOURISTIC INVESTMENTS  vs.  LUX ISLAND RESORTS

CAVELL TOURISTIC INV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CAVELL TOURISTIC 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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

LUX ISLAND RESORTS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LUX ISLAND RESORTS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with CAVELL TOURISTIC and LUX ISLAND

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

The idea behind CAVELL TOURISTIC INVESTMENTS and LUX ISLAND RESORTS 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.