Correlation Between City Lodge and Advtech
Can any of the company-specific risk be diversified away by investing in both City Lodge and Advtech 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 Advtech 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 Advtech, you can compare the effects of market volatilities on City Lodge and Advtech 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 Advtech. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Lodge and Advtech.
Diversification Opportunities for City Lodge and Advtech
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between City and Advtech is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding City Lodge Hotels and Advtech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advtech 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 Advtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advtech has no effect on the direction of City Lodge i.e., City Lodge and Advtech go up and down completely randomly.
Pair Corralation between City Lodge and Advtech
Assuming the 90 days trading horizon City Lodge is expected to generate 1.98 times less return on investment than Advtech. But when comparing it to its historical volatility, City Lodge Hotels is 1.01 times less risky than Advtech. It trades about 0.07 of its potential returns per unit of risk. Advtech is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 319,500 in Advtech on August 31, 2024 and sell it today you would earn a total of 11,000 from holding Advtech or generate 3.44% 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. Advtech
Performance |
| Timeline |
| City Lodge Hotels |
| Advtech |
City Lodge and Advtech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with City Lodge and Advtech
The main advantage of trading using opposite City Lodge and Advtech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if City Lodge position performs unexpectedly, Advtech 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 Advtech will offset losses from the drop in Advtech's long position.| City Lodge vs. Astral Foods | City Lodge vs. Copper 360 | City Lodge vs. Harmony Gold Mining | City Lodge vs. RCL Foods |
| Advtech vs. Zeder Investments | Advtech vs. Deneb Investments | Advtech vs. African Media Entertainment | Advtech vs. HomeChoice Investments |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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