Correlation Between Choice Hotels and H World
Can any of the company-specific risk be diversified away by investing in both Choice Hotels and H World 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 H World 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 H World Group, you can compare the effects of market volatilities on Choice Hotels and H World 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 H World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Hotels and H World.
Diversification Opportunities for Choice Hotels and H World
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Choice and CL4A is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and H World Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H World Group 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 H World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H World Group has no effect on the direction of Choice Hotels i.e., Choice Hotels and H World go up and down completely randomly.
Pair Corralation between Choice Hotels and H World
Assuming the 90 days horizon Choice Hotels International is expected to generate 0.63 times more return on investment than H World. However, Choice Hotels International is 1.6 times less risky than H World. It trades about 0.08 of its potential returns per unit of risk. H World Group is currently generating about 0.02 per unit of risk. If you would invest 11,015 in Choice Hotels International on September 1, 2024 and sell it today you would earn a total of 3,085 from holding Choice Hotels International or generate 28.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.53% |
| Values | Daily Returns |
Choice Hotels International vs. H World Group
Performance |
| Timeline |
| Choice Hotels Intern |
| H World Group |
Choice Hotels and H World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Choice Hotels and H World
The main advantage of trading using opposite Choice Hotels and H World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels position performs unexpectedly, H World 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 H World will offset losses from the drop in H World's long position.The idea behind Choice Hotels International and H World Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| H World vs. Neinor Homes SA | H World vs. Marie Brizard Wine | H World vs. Tri Pointe Homes | H World vs. Consolidated Communications Holdings |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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