Correlation Between Choice Hotels and Lotus Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Choice Hotels and Lotus Pharmaceuticals 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 Lotus Pharmaceuticals 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 Lotus Pharmaceuticals, you can compare the effects of market volatilities on Choice Hotels and Lotus Pharmaceuticals 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 Lotus Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Hotels and Lotus Pharmaceuticals.
Diversification Opportunities for Choice Hotels and Lotus Pharmaceuticals
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Choice and Lotus is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and Lotus Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Pharmaceuticals 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 Lotus Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotus Pharmaceuticals has no effect on the direction of Choice Hotels i.e., Choice Hotels and Lotus Pharmaceuticals go up and down completely randomly.
Pair Corralation between Choice Hotels and Lotus Pharmaceuticals
Considering the 90-day investment horizon Choice Hotels International is expected to generate 0.06 times more return on investment than Lotus Pharmaceuticals. However, Choice Hotels International is 16.04 times less risky than Lotus Pharmaceuticals. It trades about 0.39 of its potential returns per unit of risk. Lotus Pharmaceuticals is currently generating about -0.21 per unit of risk. If you would invest 13,876 in Choice Hotels International on September 2, 2024 and sell it today you would earn a total of 1,248 from holding Choice Hotels International or generate 8.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Choice Hotels International vs. Lotus Pharmaceuticals
Performance |
| Timeline |
| Choice Hotels Intern |
| Lotus Pharmaceuticals |
Choice Hotels and Lotus Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Choice Hotels and Lotus Pharmaceuticals
The main advantage of trading using opposite Choice Hotels and Lotus Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels position performs unexpectedly, Lotus Pharmaceuticals 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 Lotus Pharmaceuticals will offset losses from the drop in Lotus Pharmaceuticals' long position.| Choice Hotels vs. Hyatt Hotels | Choice Hotels vs. Hilton Worldwide Holdings | Choice Hotels vs. InterContinental Hotels Group | Choice Hotels vs. Marriott International |
| Lotus Pharmaceuticals vs. China Teletech Holding | Lotus Pharmaceuticals vs. Allied Energy | Lotus Pharmaceuticals vs. Alpha Star Acquisition | Lotus Pharmaceuticals vs. Trimax 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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