Correlation Between Choice Hotels and PennantPark Investment
Can any of the company-specific risk be diversified away by investing in both Choice Hotels and PennantPark Investment 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 PennantPark Investment 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 PennantPark Investment, you can compare the effects of market volatilities on Choice Hotels and PennantPark Investment 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 PennantPark Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Hotels and PennantPark Investment.
Diversification Opportunities for Choice Hotels and PennantPark Investment
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Choice and PennantPark is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and PennantPark Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennantPark Investment 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 PennantPark Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PennantPark Investment has no effect on the direction of Choice Hotels i.e., Choice Hotels and PennantPark Investment go up and down completely randomly.
Pair Corralation between Choice Hotels and PennantPark Investment
Assuming the 90 days horizon Choice Hotels International is expected to under-perform the PennantPark Investment. But the stock apears to be less risky and, when comparing its historical volatility, Choice Hotels International is 1.99 times less risky than PennantPark Investment. The stock trades about -0.06 of its potential returns per unit of risk. The PennantPark Investment is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 670.00 in PennantPark Investment on October 16, 2024 and sell it today you would earn a total of 28.00 from holding PennantPark Investment or generate 4.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Choice Hotels International vs. PennantPark Investment
Performance |
| Timeline |
| Choice Hotels Intern |
| PennantPark Investment |
Choice Hotels and PennantPark Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Choice Hotels and PennantPark Investment
The main advantage of trading using opposite Choice Hotels and PennantPark Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels position performs unexpectedly, PennantPark Investment 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 PennantPark Investment will offset losses from the drop in PennantPark Investment's long position.| Choice Hotels vs. T MOBILE INCDL 00001 | Choice Hotels vs. Shenandoah Telecommunications | Choice Hotels vs. ecotel communication ag | Choice Hotels vs. Cairo Communication SpA |
| PennantPark Investment vs. NH HOTEL GROUP | PennantPark Investment vs. PPHE HOTEL GROUP | PennantPark Investment vs. InterContinental Hotels Group | PennantPark Investment vs. Choice Hotels International |
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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