Correlation Between Choice Hotels and Axon Enterprise
Can any of the company-specific risk be diversified away by investing in both Choice Hotels and Axon Enterprise 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 Axon Enterprise 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 Axon Enterprise, you can compare the effects of market volatilities on Choice Hotels and Axon Enterprise 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 Axon Enterprise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Hotels and Axon Enterprise.
Diversification Opportunities for Choice Hotels and Axon Enterprise
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Choice and Axon is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and Axon Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axon Enterprise 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 Axon Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axon Enterprise has no effect on the direction of Choice Hotels i.e., Choice Hotels and Axon Enterprise go up and down completely randomly.
Pair Corralation between Choice Hotels and Axon Enterprise
Considering the 90-day investment horizon Choice Hotels is expected to generate 5.12 times less return on investment than Axon Enterprise. But when comparing it to its historical volatility, Choice Hotels International is 5.88 times less risky than Axon Enterprise. It trades about 0.31 of its potential returns per unit of risk. Axon Enterprise is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 44,477 in Axon Enterprise on August 29, 2024 and sell it today you would earn a total of 18,739 from holding Axon Enterprise or generate 42.13% 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. Axon Enterprise
Performance |
| Timeline |
| Choice Hotels Intern |
| Axon Enterprise |
Choice Hotels and Axon Enterprise Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Choice Hotels and Axon Enterprise
The main advantage of trading using opposite Choice Hotels and Axon Enterprise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels position performs unexpectedly, Axon Enterprise 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 Axon Enterprise will offset losses from the drop in Axon Enterprise'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 |
| Axon Enterprise vs. Novocure | Axon Enterprise vs. HubSpot | Axon Enterprise vs. DigitalOcean Holdings | Axon Enterprise vs. Appian 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
Other Complementary Tools
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities |