Correlation Between Choice Hotels and Stem
Can any of the company-specific risk be diversified away by investing in both Choice Hotels and Stem 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 Stem 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 Stem Inc, you can compare the effects of market volatilities on Choice Hotels and Stem 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 Stem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Hotels and Stem.
Diversification Opportunities for Choice Hotels and Stem
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Choice and Stem is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and Stem Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stem Inc 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 Stem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stem Inc has no effect on the direction of Choice Hotels i.e., Choice Hotels and Stem go up and down completely randomly.
Pair Corralation between Choice Hotels and Stem
Considering the 90-day investment horizon Choice Hotels International is expected to generate 0.19 times more return on investment than Stem. However, Choice Hotels International is 5.34 times less risky than Stem. It trades about 0.03 of its potential returns per unit of risk. Stem Inc is currently generating about -0.03 per unit of risk. If you would invest 12,160 in Choice Hotels International on November 2, 2024 and sell it today you would earn a total of 2,605 from holding Choice Hotels International or generate 21.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Choice Hotels International vs. Stem Inc
Performance |
| Timeline |
| Choice Hotels Intern |
| Stem Inc |
Choice Hotels and Stem Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Choice Hotels and Stem
The main advantage of trading using opposite Choice Hotels and Stem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels position performs unexpectedly, Stem 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 Stem will offset losses from the drop in Stem'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 |
| Stem vs. Palo Alto Networks | Stem vs. Crowdstrike Holdings | Stem vs. Cloudflare | Stem vs. Palantir Technologies Class |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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