Correlation Between Choice Hotels and Despegar Corp
Can any of the company-specific risk be diversified away by investing in both Choice Hotels and Despegar Corp 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 Despegar Corp 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 Despegar Corp, you can compare the effects of market volatilities on Choice Hotels and Despegar Corp 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 Despegar Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Hotels and Despegar Corp.
Diversification Opportunities for Choice Hotels and Despegar Corp
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Choice and Despegar is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and Despegar Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Despegar Corp 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 Despegar Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Despegar Corp has no effect on the direction of Choice Hotels i.e., Choice Hotels and Despegar Corp go up and down completely randomly.
Pair Corralation between Choice Hotels and Despegar Corp
Considering the 90-day investment horizon Choice Hotels is expected to generate 3.03 times less return on investment than Despegar Corp. But when comparing it to its historical volatility, Choice Hotels International is 3.84 times less risky than Despegar Corp. It trades about 0.3 of its potential returns per unit of risk. Despegar Corp is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 1,450 in Despegar Corp on August 31, 2024 and sell it today you would earn a total of 323.00 from holding Despegar Corp or generate 22.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Choice Hotels International vs. Despegar Corp
Performance |
| Timeline |
| Choice Hotels Intern |
| Despegar Corp |
Choice Hotels and Despegar Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Choice Hotels and Despegar Corp
The main advantage of trading using opposite Choice Hotels and Despegar Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels position performs unexpectedly, Despegar Corp 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 Despegar Corp will offset losses from the drop in Despegar Corp'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 |
| Despegar Corp vs. Yatra Online | Despegar Corp vs. Lindblad Expeditions Holdings | Despegar Corp vs. Mondee Holdings | Despegar Corp vs. Expedia Group |
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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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