Correlation Between Accor SA and Choice Hotels
Can any of the company-specific risk be diversified away by investing in both Accor SA 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 Accor SA and Choice Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Accor SA and Choice Hotels International, you can compare the effects of market volatilities on Accor SA 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 Accor SA with a short position of Choice Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Accor SA and Choice Hotels.
Diversification Opportunities for Accor SA and Choice Hotels
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Accor and Choice is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Accor SA 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 Accor SA 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 Accor SA 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 Accor SA i.e., Accor SA and Choice Hotels go up and down completely randomly.
Pair Corralation between Accor SA and Choice Hotels
Assuming the 90 days horizon Accor SA is expected to generate 3.53 times less return on investment than Choice Hotels. But when comparing it to its historical volatility, Accor SA is 1.2 times less risky than Choice Hotels. It trades about 0.1 of its potential returns per unit of risk. Choice Hotels International is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 11,671 in Choice Hotels International on August 28, 2024 and sell it today you would earn a total of 2,729 from holding Choice Hotels International or generate 23.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Accor SA vs. Choice Hotels International
Performance |
| Timeline |
| Accor SA |
| Choice Hotels Intern |
Accor SA and Choice Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Accor SA and Choice Hotels
The main advantage of trading using opposite Accor SA and Choice Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Accor SA 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.The idea behind Accor SA and Choice Hotels International pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
Other Complementary Tools
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing |