Correlation Between Choice Hotels and Teck Resources
Can any of the company-specific risk be diversified away by investing in both Choice Hotels and Teck Resources 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 Teck Resources 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 Teck Resources Ltd, you can compare the effects of market volatilities on Choice Hotels and Teck Resources 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 Teck Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Hotels and Teck Resources.
Diversification Opportunities for Choice Hotels and Teck Resources
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Choice and Teck is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and Teck Resources Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teck Resources 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 Teck Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teck Resources has no effect on the direction of Choice Hotels i.e., Choice Hotels and Teck Resources go up and down completely randomly.
Pair Corralation between Choice Hotels and Teck Resources
Assuming the 90 days horizon Choice Hotels International is expected to generate 0.73 times more return on investment than Teck Resources. However, Choice Hotels International is 1.38 times less risky than Teck Resources. It trades about 0.24 of its potential returns per unit of risk. Teck Resources Ltd is currently generating about -0.07 per unit of risk. If you would invest 11,900 in Choice Hotels International on September 5, 2024 and sell it today you would earn a total of 2,200 from holding Choice Hotels International or generate 18.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Choice Hotels International vs. Teck Resources Ltd
Performance |
| Timeline |
| Choice Hotels Intern |
| Teck Resources |
Choice Hotels and Teck Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Choice Hotels and Teck Resources
The main advantage of trading using opposite Choice Hotels and Teck Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels position performs unexpectedly, Teck Resources 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 Teck Resources will offset losses from the drop in Teck Resources' long position.| Choice Hotels vs. ALEFARM BREWING DK 05 | Choice Hotels vs. Hitachi Construction Machinery | Choice Hotels vs. Hanison Construction Holdings | Choice Hotels vs. IDP EDUCATION LTD |
| Teck Resources vs. Apollo Medical Holdings | Teck Resources vs. IMAGIN MEDICAL INC | Teck Resources vs. Choice Hotels International | Teck Resources vs. SAFETY MEDICAL PROD |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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