Correlation Between Blue Label and City Lodge
Can any of the company-specific risk be diversified away by investing in both Blue Label 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 Blue Label and City Lodge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Blue Label Telecoms and City Lodge Hotels, you can compare the effects of market volatilities on Blue Label 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 Blue Label with a short position of City Lodge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Label and City Lodge.
Diversification Opportunities for Blue Label and City Lodge
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Blue and City is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Blue Label Telecoms 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 Blue Label 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 Blue Label Telecoms 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 Blue Label i.e., Blue Label and City Lodge go up and down completely randomly.
Pair Corralation between Blue Label and City Lodge
Assuming the 90 days trading horizon Blue Label Telecoms is expected to under-perform the City Lodge. But the stock apears to be less risky and, when comparing its historical volatility, Blue Label Telecoms is 1.37 times less risky than City Lodge. The stock trades about -0.38 of its potential returns per unit of risk. The City Lodge Hotels is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 48,500 in City Lodge Hotels on August 31, 2024 and sell it today you would earn a total of 800.00 from holding City Lodge Hotels or generate 1.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Blue Label Telecoms vs. City Lodge Hotels
Performance |
| Timeline |
| Blue Label Telecoms |
| City Lodge Hotels |
Blue Label and City Lodge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Blue Label and City Lodge
The main advantage of trading using opposite Blue Label and City Lodge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Label 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 Blue Label Telecoms 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.| City Lodge vs. Astral Foods | City Lodge vs. Copper 360 | City Lodge vs. Harmony Gold Mining | City Lodge vs. RCL Foods |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
Other Complementary Tools
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges |