Correlation Between Choice Hotels and THORNEY TECHS
Can any of the company-specific risk be diversified away by investing in both Choice Hotels and THORNEY TECHS 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 THORNEY TECHS 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 THORNEY TECHS LTD, you can compare the effects of market volatilities on Choice Hotels and THORNEY TECHS 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 THORNEY TECHS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Hotels and THORNEY TECHS.
Diversification Opportunities for Choice Hotels and THORNEY TECHS
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Choice and THORNEY is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and THORNEY TECHS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THORNEY TECHS LTD 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 THORNEY TECHS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THORNEY TECHS LTD has no effect on the direction of Choice Hotels i.e., Choice Hotels and THORNEY TECHS go up and down completely randomly.
Pair Corralation between Choice Hotels and THORNEY TECHS
Assuming the 90 days horizon Choice Hotels International is expected to under-perform the THORNEY TECHS. But the stock apears to be less risky and, when comparing its historical volatility, Choice Hotels International is 2.84 times less risky than THORNEY TECHS. The stock trades about -0.34 of its potential returns per unit of risk. The THORNEY TECHS LTD is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 7.35 in THORNEY TECHS LTD on December 9, 2024 and sell it today you would lose (0.75) from holding THORNEY TECHS LTD or give up 10.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Choice Hotels International vs. THORNEY TECHS LTD
Performance |
| Timeline |
| Choice Hotels Intern |
| THORNEY TECHS LTD |
Choice Hotels and THORNEY TECHS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Choice Hotels and THORNEY TECHS
The main advantage of trading using opposite Choice Hotels and THORNEY TECHS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels position performs unexpectedly, THORNEY TECHS 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 THORNEY TECHS will offset losses from the drop in THORNEY TECHS's long position.| Choice Hotels vs. ELMOS SEMICONDUCTOR | Choice Hotels vs. CORNISH METALS INC | Choice Hotels vs. Magnachip Semiconductor | Choice Hotels vs. Elmos Semiconductor SE |
| THORNEY TECHS vs. Taiwan Semiconductor Manufacturing | THORNEY TECHS vs. Cleanaway Waste Management | THORNEY TECHS vs. ULTRA CLEAN HLDGS | THORNEY TECHS vs. ALERION CLEANPOWER |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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