Correlation Between Choice Hotels and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both Choice Hotels and Scandinavian Tobacco 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 Scandinavian Tobacco 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 Scandinavian Tobacco Group, you can compare the effects of market volatilities on Choice Hotels and Scandinavian Tobacco 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 Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Hotels and Scandinavian Tobacco.
Diversification Opportunities for Choice Hotels and Scandinavian Tobacco
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Choice and Scandinavian is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco 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 Scandinavian Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandinavian Tobacco has no effect on the direction of Choice Hotels i.e., Choice Hotels and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between Choice Hotels and Scandinavian Tobacco
Assuming the 90 days horizon Choice Hotels International is expected to under-perform the Scandinavian Tobacco. But the stock apears to be less risky and, when comparing its historical volatility, Choice Hotels International is 1.07 times less risky than Scandinavian Tobacco. The stock trades about -0.06 of its potential returns per unit of risk. The Scandinavian Tobacco Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,274 in Scandinavian Tobacco Group on October 30, 2024 and sell it today you would earn a total of 48.00 from holding Scandinavian Tobacco Group or generate 3.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Choice Hotels International vs. Scandinavian Tobacco Group
Performance |
| Timeline |
| Choice Hotels Intern |
| Scandinavian Tobacco |
Choice Hotels and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Choice Hotels and Scandinavian Tobacco
The main advantage of trading using opposite Choice Hotels and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels position performs unexpectedly, Scandinavian Tobacco 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 Scandinavian Tobacco will offset losses from the drop in Scandinavian Tobacco's long position.| Choice Hotels vs. Yuexiu Transport Infrastructure | Choice Hotels vs. CVR Medical Corp | Choice Hotels vs. ONWARD MEDICAL BV | Choice Hotels vs. DAIDO METAL TD |
| Scandinavian Tobacco vs. Gaztransport Technigaz SA | Scandinavian Tobacco vs. Air Transport Services | Scandinavian Tobacco vs. Transport International Holdings | Scandinavian Tobacco vs. PLAYWAY SA ZY 10 |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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