Correlation Between Choice Hotels and European Metals
Can any of the company-specific risk be diversified away by investing in both Choice Hotels and European 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 European 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 European Metals Holdings, you can compare the effects of market volatilities on Choice Hotels and European 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 European Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Hotels and European Metals.
Diversification Opportunities for Choice Hotels and European Metals
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Choice and European is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and European Metals Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Metals Holdings 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 European Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Metals Holdings has no effect on the direction of Choice Hotels i.e., Choice Hotels and European Metals go up and down completely randomly.
Pair Corralation between Choice Hotels and European Metals
Considering the 90-day investment horizon Choice Hotels International is expected to generate 0.36 times more return on investment than European Metals. However, Choice Hotels International is 2.78 times less risky than European Metals. It trades about 0.16 of its potential returns per unit of risk. European Metals Holdings is currently generating about -0.15 per unit of risk. If you would invest 11,340 in Choice Hotels International on September 1, 2024 and sell it today you would earn a total of 3,784 from holding Choice Hotels International or generate 33.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
Choice Hotels International vs. European Metals Holdings
Performance |
| Timeline |
| Choice Hotels Intern |
| European Metals Holdings |
Choice Hotels and European Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Choice Hotels and European Metals
The main advantage of trading using opposite Choice Hotels and European Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels position performs unexpectedly, European 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 European Metals will offset losses from the drop in European 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 |
| European Metals vs. Ardea Resources Limited | European Metals vs. Alpha Lithium | European Metals vs. Piedmont Lithium | European Metals vs. Critical Elements |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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