Correlation Between Choice Hotels and NVIDIA
Can any of the company-specific risk be diversified away by investing in both Choice Hotels and NVIDIA 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 NVIDIA 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 NVIDIA, you can compare the effects of market volatilities on Choice Hotels and NVIDIA 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 NVIDIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Hotels and NVIDIA.
Diversification Opportunities for Choice Hotels and NVIDIA
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Choice and NVIDIA is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and NVIDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA 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 NVIDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVIDIA has no effect on the direction of Choice Hotels i.e., Choice Hotels and NVIDIA go up and down completely randomly.
Pair Corralation between Choice Hotels and NVIDIA
Considering the 90-day investment horizon Choice Hotels International is expected to generate 0.43 times more return on investment than NVIDIA. However, Choice Hotels International is 2.33 times less risky than NVIDIA. It trades about 0.31 of its potential returns per unit of risk. NVIDIA is currently generating about -0.03 per unit of risk. If you would invest 14,084 in Choice Hotels International on August 29, 2024 and sell it today you would earn a total of 1,096 from holding Choice Hotels International or generate 7.78% 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. NVIDIA
Performance |
| Timeline |
| Choice Hotels Intern |
| NVIDIA |
Choice Hotels and NVIDIA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Choice Hotels and NVIDIA
The main advantage of trading using opposite Choice Hotels and NVIDIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels position performs unexpectedly, NVIDIA 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 NVIDIA will offset losses from the drop in NVIDIA'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 |
| NVIDIA vs. Intel | NVIDIA vs. Taiwan Semiconductor Manufacturing | NVIDIA vs. Marvell Technology Group | NVIDIA vs. Micron Technology |
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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