Correlation Between East Africa and Ryman Hospitality

Can any of the company-specific risk be diversified away by investing in both East Africa and Ryman Hospitality 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 East Africa and Ryman Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between East Africa Metals and Ryman Hospitality Properties, you can compare the effects of market volatilities on East Africa and Ryman Hospitality 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 East Africa with a short position of Ryman Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Africa and Ryman Hospitality.

Diversification Opportunities for East Africa and Ryman Hospitality

-0.33

Correlation Coefficient

East Africa  Ryman Hospitality

Very good diversification

The 3 months correlation between East and Ryman is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding East Africa Metals and Ryman Hospitality Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ryman Hospitality and East Africa 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 East Africa Metals are associated (or correlated) with Ryman Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ryman Hospitality has no effect on the direction of East Africa i.e., East Africa and Ryman Hospitality go up and down completely randomly.

Pair Corralation between East Africa and Ryman Hospitality

Assuming the 90 days horizon East Africa Metals is expected to generate 43.51 times more return on investment than Ryman Hospitality. However, East Africa is 43.51 times more volatile than Ryman Hospitality Properties. It trades about 0.08 of its potential returns per unit of risk. Ryman Hospitality Properties is currently generating about 0.05 per unit of risk. If you would invest  18.00  in East Africa Metals on September 23, 2024 and sell it today you would lose (7.00) from holding East Africa Metals or give up 38.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

East Africa Metals  vs.  Ryman Hospitality Properties

East Africa Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days East Africa Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Ryman Hospitality

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ryman Hospitality Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Ryman Hospitality is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with East Africa and Ryman Hospitality

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

The idea behind East Africa Metals and Ryman Hospitality Properties 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.