Correlation Between Check Point and Choice Hotels
Can any of the company-specific risk be diversified away by investing in both Check Point and Choice Hotels 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 Check Point and Choice Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Check Point Software and Choice Hotels International, you can compare the effects of market volatilities on Check Point and Choice Hotels 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 Check Point with a short position of Choice Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Check Point and Choice Hotels.
Diversification Opportunities for Check Point and Choice Hotels
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Check and Choice is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Check Point Software and Choice Hotels International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choice Hotels Intern and Check Point 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 Check Point Software are associated (or correlated) with Choice Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choice Hotels Intern has no effect on the direction of Check Point i.e., Check Point and Choice Hotels go up and down completely randomly.
Pair Corralation between Check Point and Choice Hotels
Assuming the 90 days trading horizon Check Point is expected to generate 18.11 times less return on investment than Choice Hotels. In addition to that, Check Point is 1.42 times more volatile than Choice Hotels International. It trades about 0.01 of its total potential returns per unit of risk. Choice Hotels International is currently generating about 0.27 per unit of volatility. If you would invest 11,671 in Choice Hotels International on August 28, 2024 and sell it today you would earn a total of 2,529 from holding Choice Hotels International or generate 21.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Check Point Software vs. Choice Hotels International
Performance |
| Timeline |
| Check Point Software |
| Choice Hotels Intern |
Check Point and Choice Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Check Point and Choice Hotels
The main advantage of trading using opposite Check Point and Choice Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Check Point position performs unexpectedly, Choice Hotels 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 Choice Hotels will offset losses from the drop in Choice Hotels' long position.| Check Point vs. Apple Inc | Check Point vs. Apple Inc | Check Point vs. Apple Inc | Check Point vs. Microsoft |
| Choice Hotels vs. Eagle Materials | Choice Hotels vs. RETAIL FOOD GROUP | Choice Hotels vs. VULCAN MATERIALS | Choice Hotels vs. EAGLE MATERIALS |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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