Correlation Between Choice Hotels and Nishi-Nippon Railroad
Can any of the company-specific risk be diversified away by investing in both Choice Hotels and Nishi-Nippon Railroad 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 Nishi-Nippon Railroad 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 Nishi Nippon Railroad Co, you can compare the effects of market volatilities on Choice Hotels and Nishi-Nippon Railroad 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 Nishi-Nippon Railroad. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Hotels and Nishi-Nippon Railroad.
Diversification Opportunities for Choice Hotels and Nishi-Nippon Railroad
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Choice and Nishi-Nippon is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and Nishi Nippon Railroad Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nishi Nippon Railroad 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 Nishi-Nippon Railroad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nishi Nippon Railroad has no effect on the direction of Choice Hotels i.e., Choice Hotels and Nishi-Nippon Railroad go up and down completely randomly.
Pair Corralation between Choice Hotels and Nishi-Nippon Railroad
Assuming the 90 days horizon Choice Hotels International is expected to generate 0.77 times more return on investment than Nishi-Nippon Railroad. However, Choice Hotels International is 1.3 times less risky than Nishi-Nippon Railroad. It trades about 0.11 of its potential returns per unit of risk. Nishi Nippon Railroad Co is currently generating about -0.02 per unit of risk. If you would invest 13,371 in Choice Hotels International on October 11, 2024 and sell it today you would earn a total of 329.00 from holding Choice Hotels International or generate 2.46% 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. Nishi Nippon Railroad Co
Performance |
| Timeline |
| Choice Hotels Intern |
| Nishi Nippon Railroad |
Choice Hotels and Nishi-Nippon Railroad Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Choice Hotels and Nishi-Nippon Railroad
The main advantage of trading using opposite Choice Hotels and Nishi-Nippon Railroad positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels position performs unexpectedly, Nishi-Nippon Railroad 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 Nishi-Nippon Railroad will offset losses from the drop in Nishi-Nippon Railroad's long position.| Choice Hotels vs. SEI INVESTMENTS | Choice Hotels vs. Japan Asia Investment | Choice Hotels vs. Apollo Investment Corp | Choice Hotels vs. SLR Investment Corp |
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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