Correlation Between Choice Hotels and Adriatic Metals
Can any of the company-specific risk be diversified away by investing in both Choice Hotels and Adriatic Metals 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 Adriatic Metals 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 Adriatic Metals Plc, you can compare the effects of market volatilities on Choice Hotels and Adriatic Metals 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 Adriatic Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Hotels and Adriatic Metals.
Diversification Opportunities for Choice Hotels and Adriatic Metals
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Choice and Adriatic is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and Adriatic Metals Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adriatic Metals Plc 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 Adriatic Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adriatic Metals Plc has no effect on the direction of Choice Hotels i.e., Choice Hotels and Adriatic Metals go up and down completely randomly.
Pair Corralation between Choice Hotels and Adriatic Metals
Considering the 90-day investment horizon Choice Hotels is expected to generate 1.35 times less return on investment than Adriatic Metals. But when comparing it to its historical volatility, Choice Hotels International is 2.4 times less risky than Adriatic Metals. It trades about 0.1 of its potential returns per unit of risk. Adriatic Metals Plc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 217.00 in Adriatic Metals Plc on September 1, 2024 and sell it today you would earn a total of 70.00 from holding Adriatic Metals Plc or generate 32.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Choice Hotels International vs. Adriatic Metals Plc
Performance |
| Timeline |
| Choice Hotels Intern |
| Adriatic Metals Plc |
Choice Hotels and Adriatic Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Choice Hotels and Adriatic Metals
The main advantage of trading using opposite Choice Hotels and Adriatic Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels position performs unexpectedly, Adriatic Metals 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 Adriatic Metals will offset losses from the drop in Adriatic Metals' long position.| Choice Hotels vs. Hyatt Hotels | Choice Hotels vs. Hilton Worldwide Holdings | Choice Hotels vs. InterContinental Hotels Group | Choice Hotels vs. Marriott International |
| Adriatic Metals vs. ATT Inc | Adriatic Metals vs. Merck Company | Adriatic Metals vs. Walt Disney | Adriatic Metals vs. Caterpillar |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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