Correlation Between Choice Hotels and TREECOM
Can any of the company-specific risk be diversified away by investing in both Choice Hotels and TREECOM 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 TREECOM 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 TREECOM, you can compare the effects of market volatilities on Choice Hotels and TREECOM 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 TREECOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Hotels and TREECOM.
Diversification Opportunities for Choice Hotels and TREECOM
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Choice and TREECOM is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and TREECOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TREECOM 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 TREECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TREECOM has no effect on the direction of Choice Hotels i.e., Choice Hotels and TREECOM go up and down completely randomly.
Pair Corralation between Choice Hotels and TREECOM
Assuming the 90 days horizon Choice Hotels International is expected to generate 0.31 times more return on investment than TREECOM. However, Choice Hotels International is 3.23 times less risky than TREECOM. It trades about 0.01 of its potential returns per unit of risk. TREECOM is currently generating about -0.21 per unit of risk. If you would invest 13,400 in Choice Hotels International on September 12, 2024 and sell it today you would earn a total of 0.00 from holding Choice Hotels International or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Choice Hotels International vs. TREECOM
Performance |
| Timeline |
| Choice Hotels Intern |
| TREECOM |
Choice Hotels and TREECOM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Choice Hotels and TREECOM
The main advantage of trading using opposite Choice Hotels and TREECOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels position performs unexpectedly, TREECOM 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 TREECOM will offset losses from the drop in TREECOM's long position.| Choice Hotels vs. SIEM OFFSHORE NEW | Choice Hotels vs. ULTRA CLEAN HLDGS | Choice Hotels vs. MSAD INSURANCE | Choice Hotels vs. Goosehead Insurance |
| TREECOM vs. DATAGROUP SE | TREECOM vs. GALENA MINING LTD | TREECOM vs. MINCO SILVER | TREECOM vs. Zijin Mining 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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