Correlation Between City Lodge and ABSA Bank
Can any of the company-specific risk be diversified away by investing in both City Lodge and ABSA Bank 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 ABSA Bank 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 ABSA Bank Limited, you can compare the effects of market volatilities on City Lodge and ABSA Bank 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 ABSA Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Lodge and ABSA Bank.
Diversification Opportunities for City Lodge and ABSA Bank
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between City and ABSA is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding City Lodge Hotels and ABSA Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABSA Bank Limited 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 ABSA Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABSA Bank Limited has no effect on the direction of City Lodge i.e., City Lodge and ABSA Bank go up and down completely randomly.
Pair Corralation between City Lodge and ABSA Bank
Assuming the 90 days trading horizon City Lodge Hotels is expected to generate 1.48 times more return on investment than ABSA Bank. However, City Lodge is 1.48 times more volatile than ABSA Bank Limited. It trades about 0.01 of its potential returns per unit of risk. ABSA Bank Limited is currently generating about 0.01 per unit of risk. If you would invest 50,361 in City Lodge Hotels on September 12, 2024 and sell it today you would earn a total of 1,039 from holding City Lodge Hotels or generate 2.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
City Lodge Hotels vs. ABSA Bank Limited
Performance |
| Timeline |
| City Lodge Hotels |
| ABSA Bank Limited |
City Lodge and ABSA Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with City Lodge and ABSA Bank
The main advantage of trading using opposite City Lodge and ABSA Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if City Lodge position performs unexpectedly, ABSA Bank 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 ABSA Bank will offset losses from the drop in ABSA Bank'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 |
| ABSA Bank vs. City Lodge Hotels | ABSA Bank vs. eMedia Holdings Limited | ABSA Bank vs. Astral Foods | ABSA Bank 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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