Correlation Between Choice Hotels and PayPal Holdings
Can any of the company-specific risk be diversified away by investing in both Choice Hotels and PayPal Holdings 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 PayPal Holdings 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 PayPal Holdings, you can compare the effects of market volatilities on Choice Hotels and PayPal Holdings 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 PayPal Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Hotels and PayPal Holdings.
Diversification Opportunities for Choice Hotels and PayPal Holdings
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Choice and PayPal is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and PayPal Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PayPal 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 PayPal Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PayPal Holdings has no effect on the direction of Choice Hotels i.e., Choice Hotels and PayPal Holdings go up and down completely randomly.
Pair Corralation between Choice Hotels and PayPal Holdings
Considering the 90-day investment horizon Choice Hotels International is expected to generate 0.55 times more return on investment than PayPal Holdings. However, Choice Hotels International is 1.83 times less risky than PayPal Holdings. It trades about 0.31 of its potential returns per unit of risk. PayPal Holdings is currently generating about 0.1 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 | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Choice Hotels International vs. PayPal Holdings
Performance |
| Timeline |
| Choice Hotels Intern |
| PayPal Holdings |
Choice Hotels and PayPal Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Choice Hotels and PayPal Holdings
The main advantage of trading using opposite Choice Hotels and PayPal Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels position performs unexpectedly, PayPal Holdings 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 PayPal Holdings will offset losses from the drop in PayPal Holdings' long position.| Choice Hotels vs. Hyatt Hotels | Choice Hotels vs. Hilton Worldwide Holdings | Choice Hotels vs. InterContinental Hotels Group | Choice Hotels vs. Marriott International |
| PayPal Holdings vs. SoFi Technologies | PayPal Holdings vs. Visa Class A | PayPal Holdings vs. Mastercard | PayPal Holdings vs. Capital One Financial |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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