Correlation Between Broadcom and Choice Hotels
Can any of the company-specific risk be diversified away by investing in both Broadcom and Choice Hotels 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 Broadcom and Choice Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Broadcom and Choice Hotels International, you can compare the effects of market volatilities on Broadcom and Choice Hotels 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 Broadcom with a short position of Choice Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Broadcom and Choice Hotels.
Diversification Opportunities for Broadcom and Choice Hotels
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Broadcom and Choice is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Broadcom and Choice Hotels International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choice Hotels Intern and Broadcom 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 Broadcom are associated (or correlated) with Choice Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choice Hotels Intern has no effect on the direction of Broadcom i.e., Broadcom and Choice Hotels go up and down completely randomly.
Pair Corralation between Broadcom and Choice Hotels
Assuming the 90 days trading horizon Broadcom is expected to generate 4.47 times more return on investment than Choice Hotels. However, Broadcom is 4.47 times more volatile than Choice Hotels International. It trades about 0.31 of its potential returns per unit of risk. Choice Hotels International is currently generating about 0.11 per unit of risk. If you would invest 16,192 in Broadcom on October 11, 2024 and sell it today you would earn a total of 5,998 from holding Broadcom or generate 37.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 94.44% |
| Values | Daily Returns |
Broadcom vs. Choice Hotels International
Performance |
| Timeline |
| Broadcom |
| Choice Hotels Intern |
Broadcom and Choice Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Broadcom and Choice Hotels
The main advantage of trading using opposite Broadcom and Choice Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Broadcom position performs unexpectedly, Choice Hotels 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 Choice Hotels will offset losses from the drop in Choice Hotels' long position.| Broadcom vs. G III Apparel Group | Broadcom vs. NORTHEAST UTILITIES | Broadcom vs. ALGOMA STEEL GROUP | Broadcom vs. COSMOSTEEL HLDGS |
| Choice Hotels vs. SEI INVESTMENTS | Choice Hotels vs. Japan Asia Investment | Choice Hotels vs. Apollo Investment Corp | Choice Hotels vs. SLR Investment Corp |
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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