Correlation Between City Lodge and Avi
Can any of the company-specific risk be diversified away by investing in both City Lodge and Avi 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 City Lodge and Avi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between City Lodge Hotels and Avi, you can compare the effects of market volatilities on City Lodge and Avi 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 City Lodge with a short position of Avi. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Lodge and Avi.
Diversification Opportunities for City Lodge and Avi
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between City and Avi is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding City Lodge Hotels and Avi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avi and City Lodge 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 City Lodge Hotels are associated (or correlated) with Avi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avi has no effect on the direction of City Lodge i.e., City Lodge and Avi go up and down completely randomly.
Pair Corralation between City Lodge and Avi
Assuming the 90 days trading horizon City Lodge Hotels is expected to generate 1.13 times more return on investment than Avi. However, City Lodge is 1.13 times more volatile than Avi. It trades about 0.15 of its potential returns per unit of risk. Avi is currently generating about 0.06 per unit of risk. If you would invest 45,200 in City Lodge Hotels on September 12, 2024 and sell it today you would earn a total of 6,200 from holding City Lodge Hotels or generate 13.72% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
City Lodge Hotels vs. Avi
Performance |
Timeline |
City Lodge Hotels |
Avi |
City Lodge and Avi Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with City Lodge and Avi
The main advantage of trading using opposite City Lodge and Avi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if City Lodge position performs unexpectedly, Avi 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 Avi will offset losses from the drop in Avi's long position.City Lodge vs. British American Tobacco | City Lodge vs. Glencore PLC | City Lodge vs. Anglo American PLC | City Lodge vs. ABSA Bank Limited |
Avi vs. City Lodge Hotels | Avi vs. Astoria Investments | Avi vs. Zeder Investments | Avi vs. Reinet Investments SCA |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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