Correlation Between Choice Hotels and Carsales
Can any of the company-specific risk be diversified away by investing in both Choice Hotels and Carsales 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 Carsales 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 CarsalesCom, you can compare the effects of market volatilities on Choice Hotels and Carsales 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 Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Hotels and Carsales.
Diversification Opportunities for Choice Hotels and Carsales
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Choice and Carsales is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and CarsalesCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom 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 Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom has no effect on the direction of Choice Hotels i.e., Choice Hotels and Carsales go up and down completely randomly.
Pair Corralation between Choice Hotels and Carsales
Assuming the 90 days horizon Choice Hotels International is expected to generate 0.96 times more return on investment than Carsales. However, Choice Hotels International is 1.05 times less risky than Carsales. It trades about 0.11 of its potential returns per unit of risk. CarsalesCom is currently generating about 0.09 per unit of risk. If you would invest 11,044 in Choice Hotels International on September 3, 2024 and sell it today you would earn a total of 3,056 from holding Choice Hotels International or generate 27.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Choice Hotels International vs. CarsalesCom
Performance |
| Timeline |
| Choice Hotels Intern |
| CarsalesCom |
Choice Hotels and Carsales Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Choice Hotels and Carsales
The main advantage of trading using opposite Choice Hotels and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels position performs unexpectedly, Carsales 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 Carsales will offset losses from the drop in Carsales' long position.| Choice Hotels vs. Check Point Software | Choice Hotels vs. AXWAY SOFTWARE EO | Choice Hotels vs. ECHO INVESTMENT ZY | Choice Hotels vs. Take Two Interactive Software |
| Carsales vs. Hyrican Informationssysteme Aktiengesellschaft | Carsales vs. Fidelity National Information | Carsales vs. Science Applications International | Carsales vs. Nok Airlines PCL |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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