Correlation Between Choice Hotels and Union Pacific
Can any of the company-specific risk be diversified away by investing in both Choice Hotels and Union Pacific 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 Union Pacific 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 Union Pacific, you can compare the effects of market volatilities on Choice Hotels and Union Pacific 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 Union Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Hotels and Union Pacific.
Diversification Opportunities for Choice Hotels and Union Pacific
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Choice and Union is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and Union Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Pacific 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 Union Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Pacific has no effect on the direction of Choice Hotels i.e., Choice Hotels and Union Pacific go up and down completely randomly.
Pair Corralation between Choice Hotels and Union Pacific
Assuming the 90 days horizon Choice Hotels International is expected to generate 1.31 times more return on investment than Union Pacific. However, Choice Hotels is 1.31 times more volatile than Union Pacific. It trades about 0.05 of its potential returns per unit of risk. Union Pacific is currently generating about 0.05 per unit of risk. If you would invest 10,659 in Choice Hotels International on September 12, 2024 and sell it today you would earn a total of 3,241 from holding Choice Hotels International or generate 30.41% 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. Union Pacific
Performance |
| Timeline |
| Choice Hotels Intern |
| Union Pacific |
Choice Hotels and Union Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Choice Hotels and Union Pacific
The main advantage of trading using opposite Choice Hotels and Union Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels position performs unexpectedly, Union Pacific 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 Union Pacific will offset losses from the drop in Union Pacific'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 |
| Union Pacific vs. LANDSEA HOMES P | Union Pacific vs. BORR DRILLING NEW | Union Pacific vs. Addus HomeCare | Union Pacific vs. CENTURIA OFFICE REIT |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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