Correlation Between City Lodge and AfricaRhodium ETF

Can any of the company-specific risk be diversified away by investing in both City Lodge and AfricaRhodium ETF 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 AfricaRhodium ETF 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 AfricaRhodium ETF, you can compare the effects of market volatilities on City Lodge and AfricaRhodium ETF 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 AfricaRhodium ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Lodge and AfricaRhodium ETF.

Diversification Opportunities for City Lodge and AfricaRhodium ETF

-0.06

Correlation Coefficient

City Lodge  AfricaRhodium ETF

Good diversification

The 3 months correlation between City and AfricaRhodium is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding City Lodge Hotels and AfricaRhodium ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AfricaRhodium ETF 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 AfricaRhodium ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AfricaRhodium ETF has no effect on the direction of City Lodge i.e., City Lodge and AfricaRhodium ETF go up and down completely randomly.

Pair Corralation between City Lodge and AfricaRhodium ETF

Assuming the 90 days trading horizon City Lodge is expected to generate 66.67 times less return on investment than AfricaRhodium ETF. But when comparing it to its historical volatility, City Lodge Hotels is 1.89 times less risky than AfricaRhodium ETF. It trades about 0.0 of its potential returns per unit of risk. AfricaRhodium ETF is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  7,633,100  in AfricaRhodium ETF on September 4, 2024 and sell it today you would earn a total of  58,000  from holding AfricaRhodium ETF or generate 0.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

City Lodge Hotels  vs.  AfricaRhodium ETF

City Lodge Hotels

Risk-Adjusted Performance

0 of 100

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 rather sound technical and fundamental indicators, City Lodge is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

AfricaRhodium ETF

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AfricaRhodium ETF are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, AfricaRhodium ETF is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with City Lodge and AfricaRhodium ETF

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

The idea behind City Lodge Hotels and AfricaRhodium ETF 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.