Correlation Between Choice Hotels and Fast Retailing
Can any of the company-specific risk be diversified away by investing in both Choice Hotels and Fast Retailing 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 Fast Retailing 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 Fast Retailing Co, you can compare the effects of market volatilities on Choice Hotels and Fast Retailing 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 Fast Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Hotels and Fast Retailing.
Diversification Opportunities for Choice Hotels and Fast Retailing
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Choice and Fast is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing 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 Fast Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Retailing has no effect on the direction of Choice Hotels i.e., Choice Hotels and Fast Retailing go up and down completely randomly.
Pair Corralation between Choice Hotels and Fast Retailing
Assuming the 90 days horizon Choice Hotels International is expected to generate 0.48 times more return on investment than Fast Retailing. However, Choice Hotels International is 2.08 times less risky than Fast Retailing. It trades about -0.06 of its potential returns per unit of risk. Fast Retailing Co is currently generating about -0.14 per unit of risk. If you would invest 13,771 in Choice Hotels International on October 16, 2024 and sell it today you would lose (171.00) from holding Choice Hotels International or give up 1.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 94.12% |
| Values | Daily Returns |
Choice Hotels International vs. Fast Retailing Co
Performance |
| Timeline |
| Choice Hotels Intern |
| Fast Retailing |
Choice Hotels and Fast Retailing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Choice Hotels and Fast Retailing
The main advantage of trading using opposite Choice Hotels and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels position performs unexpectedly, Fast Retailing 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 Fast Retailing will offset losses from the drop in Fast Retailing'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 |
| Fast Retailing vs. NURAN WIRELESS INC | Fast Retailing vs. Tower One Wireless | Fast Retailing vs. Ryanair Holdings plc | Fast Retailing vs. Air New Zealand |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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