Correlation Between Choice Hotels and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both Choice Hotels and Norsk Hydro 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 Norsk Hydro 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 Norsk Hydro ASA, you can compare the effects of market volatilities on Choice Hotels and Norsk Hydro 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 Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Hotels and Norsk Hydro.
Diversification Opportunities for Choice Hotels and Norsk Hydro
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Choice and Norsk is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and Norsk Hydro ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norsk Hydro ASA 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 Norsk Hydro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norsk Hydro ASA has no effect on the direction of Choice Hotels i.e., Choice Hotels and Norsk Hydro go up and down completely randomly.
Pair Corralation between Choice Hotels and Norsk Hydro
Assuming the 90 days horizon Choice Hotels International is expected to generate 0.92 times more return on investment than Norsk Hydro. However, Choice Hotels International is 1.09 times less risky than Norsk Hydro. It trades about -0.02 of its potential returns per unit of risk. Norsk Hydro ASA is currently generating about -0.26 per unit of risk. If you would invest 13,700 in Choice Hotels International on September 19, 2024 and sell it today you would lose (100.00) from holding Choice Hotels International or give up 0.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Choice Hotels International vs. Norsk Hydro ASA
Performance |
| Timeline |
| Choice Hotels Intern |
| Norsk Hydro ASA |
Choice Hotels and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Choice Hotels and Norsk Hydro
The main advantage of trading using opposite Choice Hotels and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels position performs unexpectedly, Norsk Hydro 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 Norsk Hydro will offset losses from the drop in Norsk Hydro's long position.| Choice Hotels vs. Hyatt Hotels | Choice Hotels vs. InterContinental Hotels Group | Choice Hotels vs. INTERCONT HOTELS | Choice Hotels vs. Wyndham Hotels Resorts |
| Norsk Hydro vs. T MOBILE US | Norsk Hydro vs. PT Ace Hardware | Norsk Hydro vs. Align Technology | Norsk Hydro vs. SMA Solar Technology |
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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