Correlation Between Choice Hotels and AAP
Can any of the company-specific risk be diversified away by investing in both Choice Hotels and AAP 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 Choice Hotels and AAP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Choice Hotels International and AAP Inc, you can compare the effects of market volatilities on Choice Hotels and AAP 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 Choice Hotels with a short position of AAP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Hotels and AAP.
Diversification Opportunities for Choice Hotels and AAP
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Choice and AAP is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and AAP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAP Inc and Choice Hotels 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 Choice Hotels International are associated (or correlated) with AAP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAP Inc has no effect on the direction of Choice Hotels i.e., Choice Hotels and AAP go up and down completely randomly.
Pair Corralation between Choice Hotels and AAP
Considering the 90-day investment horizon Choice Hotels is expected to generate 32.04 times less return on investment than AAP. But when comparing it to its historical volatility, Choice Hotels International is 23.52 times less risky than AAP. It trades about 0.1 of its potential returns per unit of risk. AAP Inc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 0.03 in AAP Inc on September 1, 2024 and sell it today you would lose (0.01) from holding AAP Inc or give up 33.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.47% |
| Values | Daily Returns |
Choice Hotels International vs. AAP Inc
Performance |
| Timeline |
| Choice Hotels Intern |
| AAP Inc |
Choice Hotels and AAP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Choice Hotels and AAP
The main advantage of trading using opposite Choice Hotels and AAP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels position performs unexpectedly, AAP 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 AAP will offset losses from the drop in AAP's long position.| Choice Hotels vs. Hyatt Hotels | Choice Hotels vs. Hilton Worldwide Holdings | Choice Hotels vs. InterContinental Hotels Group | Choice Hotels vs. Marriott International |
| AAP vs. Baylin Technologies | AAP vs. Viavi Solutions | AAP vs. SatixFy Communications | AAP vs. Electronic Systems Technology |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
Other Complementary Tools
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio |