Correlation Between City Lodge and Blue Label
Can any of the company-specific risk be diversified away by investing in both City Lodge and Blue Label 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 Blue Label 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 Blue Label Telecoms, you can compare the effects of market volatilities on City Lodge and Blue Label 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 Blue Label. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Lodge and Blue Label.
Diversification Opportunities for City Lodge and Blue Label
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between City and Blue is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding City Lodge Hotels and Blue Label Telecoms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Label Telecoms 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 Blue Label. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Label Telecoms has no effect on the direction of City Lodge i.e., City Lodge and Blue Label go up and down completely randomly.
Pair Corralation between City Lodge and Blue Label
Assuming the 90 days trading horizon City Lodge is expected to generate 1.8 times less return on investment than Blue Label. In addition to that, City Lodge is 1.11 times more volatile than Blue Label Telecoms. It trades about 0.04 of its total potential returns per unit of risk. Blue Label Telecoms is currently generating about 0.08 per unit of volatility. If you would invest 49,300 in Blue Label Telecoms on September 2, 2024 and sell it today you would earn a total of 3,900 from holding Blue Label Telecoms or generate 7.91% 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. Blue Label Telecoms
Performance |
| Timeline |
| City Lodge Hotels |
| Blue Label Telecoms |
City Lodge and Blue Label Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with City Lodge and Blue Label
The main advantage of trading using opposite City Lodge and Blue Label positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if City Lodge position performs unexpectedly, Blue Label 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 Blue Label will offset losses from the drop in Blue Label's long position.| City Lodge vs. RCL Foods | City Lodge vs. Astral Foods | City Lodge vs. eMedia Holdings Limited | City Lodge vs. Astoria 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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