Correlation Between City Lodge and Omnia Holdings
Can any of the company-specific risk be diversified away by investing in both City Lodge and Omnia Holdings 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 Omnia Holdings 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 Omnia Holdings Limited, you can compare the effects of market volatilities on City Lodge and Omnia Holdings 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 Omnia Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Lodge and Omnia Holdings.
Diversification Opportunities for City Lodge and Omnia Holdings
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between City and Omnia is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding City Lodge Hotels and Omnia Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omnia Holdings 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 Omnia Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Omnia Holdings has no effect on the direction of City Lodge i.e., City Lodge and Omnia Holdings go up and down completely randomly.
Pair Corralation between City Lodge and Omnia Holdings
Assuming the 90 days trading horizon City Lodge is expected to generate 3.91 times less return on investment than Omnia Holdings. In addition to that, City Lodge is 1.02 times more volatile than Omnia Holdings Limited. It trades about 0.11 of its total potential returns per unit of risk. Omnia Holdings Limited is currently generating about 0.44 per unit of volatility. If you would invest 661,300 in Omnia Holdings Limited on September 5, 2024 and sell it today you would earn a total of 73,700 from holding Omnia Holdings Limited or generate 11.14% 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. Omnia Holdings Limited
Performance |
| Timeline |
| City Lodge Hotels |
| Omnia Holdings |
City Lodge and Omnia Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with City Lodge and Omnia Holdings
The main advantage of trading using opposite City Lodge and Omnia Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if City Lodge position performs unexpectedly, Omnia Holdings 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 Omnia Holdings will offset losses from the drop in Omnia Holdings' long position.| City Lodge vs. Prosus NV | City Lodge vs. British American Tobacco | City Lodge vs. Glencore PLC | City Lodge vs. Anglo American PLC |
| Omnia Holdings vs. ABSA Bank Limited | Omnia Holdings vs. Standard Bank Group | Omnia Holdings vs. Europa Metals | Omnia Holdings vs. Harmony Gold Mining |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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