Correlation Between Choice Hotels and PT Indofood
Can any of the company-specific risk be diversified away by investing in both Choice Hotels and PT Indofood 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 PT Indofood 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 PT Indofood Sukses, you can compare the effects of market volatilities on Choice Hotels and PT Indofood 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 PT Indofood. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Hotels and PT Indofood.
Diversification Opportunities for Choice Hotels and PT Indofood
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Choice and ISM is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and PT Indofood Sukses in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Indofood Sukses 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 PT Indofood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Indofood Sukses has no effect on the direction of Choice Hotels i.e., Choice Hotels and PT Indofood go up and down completely randomly.
Pair Corralation between Choice Hotels and PT Indofood
Assuming the 90 days horizon Choice Hotels is expected to generate 1.47 times less return on investment than PT Indofood. But when comparing it to its historical volatility, Choice Hotels International is 2.39 times less risky than PT Indofood. It trades about 0.04 of its potential returns per unit of risk. PT Indofood Sukses is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 39.00 in PT Indofood Sukses on September 22, 2024 and sell it today you would earn a total of 4.00 from holding PT Indofood Sukses or generate 10.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Choice Hotels International vs. PT Indofood Sukses
Performance |
| Timeline |
| Choice Hotels Intern |
| PT Indofood Sukses |
Choice Hotels and PT Indofood Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Choice Hotels and PT Indofood
The main advantage of trading using opposite Choice Hotels and PT Indofood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels position performs unexpectedly, PT Indofood 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 PT Indofood will offset losses from the drop in PT Indofood's long position.| Choice Hotels vs. Take Two Interactive Software | Choice Hotels vs. QIIWI GAMES AB | Choice Hotels vs. CPU SOFTWAREHOUSE | Choice Hotels vs. BRAGG GAMING GRP |
| PT Indofood vs. Mowi ASA | PT Indofood vs. LEROY SEAFOOD GRUNSPADR | PT Indofood vs. Lery Seafood Group | PT Indofood vs. Nisshin Seifun Group |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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