Correlation Between Sumitomo Mitsui and Choice Hotels
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui 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 Sumitomo Mitsui and Choice Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Mitsui Construction and Choice Hotels International, you can compare the effects of market volatilities on Sumitomo Mitsui 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 Sumitomo Mitsui with a short position of Choice Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and Choice Hotels.
Diversification Opportunities for Sumitomo Mitsui and Choice Hotels
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sumitomo and Choice is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Construction 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 Sumitomo Mitsui 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 Sumitomo Mitsui Construction 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 Sumitomo Mitsui i.e., Sumitomo Mitsui and Choice Hotels go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and Choice Hotels
Assuming the 90 days horizon Sumitomo Mitsui is expected to generate 1.69 times less return on investment than Choice Hotels. In addition to that, Sumitomo Mitsui is 1.26 times more volatile than Choice Hotels International. It trades about 0.15 of its total potential returns per unit of risk. Choice Hotels International is currently generating about 0.32 per unit of volatility. If you would invest 12,700 in Choice Hotels International on September 2, 2024 and sell it today you would earn a total of 1,400 from holding Choice Hotels International or generate 11.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Mitsui Construction vs. Choice Hotels International
Performance |
| Timeline |
| Sumitomo Mitsui Cons |
| Choice Hotels Intern |
Sumitomo Mitsui and Choice Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Mitsui and Choice Hotels
The main advantage of trading using opposite Sumitomo Mitsui and Choice Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui 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.| Sumitomo Mitsui vs. SIVERS SEMICONDUCTORS AB | Sumitomo Mitsui vs. Darden Restaurants | Sumitomo Mitsui vs. Reliance Steel Aluminum | Sumitomo Mitsui vs. Q2M Managementberatung AG |
| Choice Hotels vs. Coeur Mining | Choice Hotels vs. MINCO SILVER | Choice Hotels vs. FORMPIPE SOFTWARE AB | Choice Hotels vs. Calibre Mining 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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