Correlation Between City Lodge and British Amer
Can any of the company-specific risk be diversified away by investing in both City Lodge and British Amer 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 British Amer 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 British American Tobacco, you can compare the effects of market volatilities on City Lodge and British Amer 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 British Amer. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Lodge and British Amer.
Diversification Opportunities for City Lodge and British Amer
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between City and British is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding City Lodge Hotels and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British Amer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of City Lodge i.e., City Lodge and British Amer go up and down completely randomly.
Pair Corralation between City Lodge and British Amer
Assuming the 90 days trading horizon City Lodge is expected to generate 2.08 times less return on investment than British Amer. In addition to that, City Lodge is 1.43 times more volatile than British American Tobacco. It trades about 0.01 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.03 per unit of volatility. If you would invest 5,968,596 in British American Tobacco on September 2, 2024 and sell it today you would earn a total of 862,404 from holding British American Tobacco or generate 14.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
City Lodge Hotels vs. British American Tobacco
Performance |
| Timeline |
| City Lodge Hotels |
| British American Tobacco |
City Lodge and British Amer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with City Lodge and British Amer
The main advantage of trading using opposite City Lodge and British Amer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if City Lodge position performs unexpectedly, British Amer 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 British Amer will offset losses from the drop in British Amer's long position.| City Lodge vs. RCL Foods | City Lodge vs. Astral Foods | City Lodge vs. eMedia Holdings Limited | City Lodge vs. Astoria Investments |
| British Amer vs. Centaur Bci Balanced | British Amer vs. Sabvest Capital | British Amer vs. AfricaRhodium ETF | British Amer vs. Indexco Limited |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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