Correlation Between E Media and City Lodge
Can any of the company-specific risk be diversified away by investing in both E Media and City Lodge 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 E Media and City Lodge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between E Media Holdings and City Lodge Hotels, you can compare the effects of market volatilities on E Media and City Lodge 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 E Media with a short position of City Lodge. Check out your portfolio center. Please also check ongoing floating volatility patterns of E Media and City Lodge.
Diversification Opportunities for E Media and City Lodge
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between EMH and City is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding E Media Holdings and City Lodge Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Lodge Hotels and E Media 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 E Media Holdings are associated (or correlated) with City Lodge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Lodge Hotels has no effect on the direction of E Media i.e., E Media and City Lodge go up and down completely randomly.
Pair Corralation between E Media and City Lodge
Assuming the 90 days trading horizon E Media Holdings is expected to under-perform the City Lodge. In addition to that, E Media is 2.15 times more volatile than City Lodge Hotels. It trades about 0.0 of its total potential returns per unit of risk. City Lodge Hotels is currently generating about 0.04 per unit of volatility. If you would invest 48,000 in City Lodge Hotels on September 3, 2024 and sell it today you would earn a total of 1,500 from holding City Lodge Hotels or generate 3.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.44% |
| Values | Daily Returns |
E Media Holdings vs. City Lodge Hotels
Performance |
| Timeline |
| E Media Holdings |
| City Lodge Hotels |
E Media and City Lodge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with E Media and City Lodge
The main advantage of trading using opposite E Media and City Lodge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E Media position performs unexpectedly, City Lodge 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 City Lodge will offset losses from the drop in City Lodge's long position.| E Media vs. eMedia Holdings Limited | E Media vs. Sasol Ltd Bee | E Media vs. Centaur Bci Balanced | E Media vs. Sabvest Capital |
| City Lodge vs. Prosus NV | City Lodge vs. British American Tobacco | City Lodge vs. Glencore PLC | City Lodge vs. Anglo American PLC |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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