Correlation Between DAIRY FARM and Choice Hotels
Can any of the company-specific risk be diversified away by investing in both DAIRY FARM and Choice Hotels 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 DAIRY FARM and Choice Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DAIRY FARM INTL and Choice Hotels International, you can compare the effects of market volatilities on DAIRY FARM and Choice Hotels 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 DAIRY FARM with a short position of Choice Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of DAIRY FARM and Choice Hotels.
Diversification Opportunities for DAIRY FARM and Choice Hotels
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between DAIRY and Choice is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding DAIRY FARM INTL and Choice Hotels International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choice Hotels Intern and DAIRY FARM 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 DAIRY FARM INTL are associated (or correlated) with Choice Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choice Hotels Intern has no effect on the direction of DAIRY FARM i.e., DAIRY FARM and Choice Hotels go up and down completely randomly.
Pair Corralation between DAIRY FARM and Choice Hotels
Assuming the 90 days trading horizon DAIRY FARM INTL is expected to generate 1.42 times more return on investment than Choice Hotels. However, DAIRY FARM is 1.42 times more volatile than Choice Hotels International. It trades about 0.11 of its potential returns per unit of risk. Choice Hotels International is currently generating about 0.11 per unit of risk. If you would invest 169.00 in DAIRY FARM INTL on September 27, 2024 and sell it today you would earn a total of 55.00 from holding DAIRY FARM INTL or generate 32.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
DAIRY FARM INTL vs. Choice Hotels International
Performance |
| Timeline |
| DAIRY FARM INTL |
| Choice Hotels Intern |
DAIRY FARM and Choice Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DAIRY FARM and Choice Hotels
The main advantage of trading using opposite DAIRY FARM and Choice Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAIRY FARM position performs unexpectedly, Choice Hotels 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 Choice Hotels will offset losses from the drop in Choice Hotels' long position.The idea behind DAIRY FARM INTL and Choice Hotels International pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Choice Hotels vs. Marriott International | Choice Hotels vs. Hilton Worldwide Holdings | Choice Hotels vs. H World Group | Choice Hotels vs. Hyatt Hotels |
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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