Correlation Between Universal Partners and City Lodge
Can any of the company-specific risk be diversified away by investing in both Universal Partners 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 Universal Partners and City Lodge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Partners and City Lodge Hotels, you can compare the effects of market volatilities on Universal Partners 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 Universal Partners with a short position of City Lodge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Partners and City Lodge.
Diversification Opportunities for Universal Partners and City Lodge
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Universal and City is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Universal Partners 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 Universal Partners 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 Universal Partners 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 Universal Partners i.e., Universal Partners and City Lodge go up and down completely randomly.
Pair Corralation between Universal Partners and City Lodge
Assuming the 90 days trading horizon Universal Partners is expected to under-perform the City Lodge. In addition to that, Universal Partners is 2.58 times more volatile than City Lodge Hotels. It trades about -0.07 of its total potential returns per unit of risk. City Lodge Hotels is currently generating about 0.31 per unit of volatility. If you would invest 48,000 in City Lodge Hotels on September 12, 2024 and sell it today you would earn a total of 3,400 from holding City Lodge Hotels or generate 7.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Partners vs. City Lodge Hotels
Performance |
| Timeline |
| Universal Partners |
| City Lodge Hotels |
Universal Partners and City Lodge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Partners and City Lodge
The main advantage of trading using opposite Universal Partners and City Lodge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Partners 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.| Universal Partners vs. MC Mining | Universal Partners vs. ABSA Bank Limited | Universal Partners vs. Advtech | Universal Partners vs. Trematon Capital Investments |
| City Lodge vs. British American Tobacco | City Lodge vs. Glencore PLC | City Lodge vs. Anglo American PLC | City Lodge vs. ABSA Bank 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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