Correlation Between Dominion Energy and Choice Hotels
Can any of the company-specific risk be diversified away by investing in both Dominion Energy 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 Dominion Energy and Choice Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dominion Energy and Choice Hotels International, you can compare the effects of market volatilities on Dominion Energy 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 Dominion Energy with a short position of Choice Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dominion Energy and Choice Hotels.
Diversification Opportunities for Dominion Energy and Choice Hotels
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dominion and Choice is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Dominion Energy 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 Dominion Energy 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 Dominion Energy 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 Dominion Energy i.e., Dominion Energy and Choice Hotels go up and down completely randomly.
Pair Corralation between Dominion Energy and Choice Hotels
Assuming the 90 days horizon Dominion Energy is expected to generate 1.88 times less return on investment than Choice Hotels. But when comparing it to its historical volatility, Dominion Energy is 1.07 times less risky than Choice Hotels. It trades about 0.12 of its potential returns per unit of risk. Choice Hotels International is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 11,372 in Choice Hotels International on September 3, 2024 and sell it today you would earn a total of 2,728 from holding Choice Hotels International or generate 23.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dominion Energy vs. Choice Hotels International
Performance |
| Timeline |
| Dominion Energy |
| Choice Hotels Intern |
Dominion Energy and Choice Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dominion Energy and Choice Hotels
The main advantage of trading using opposite Dominion Energy and Choice Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dominion Energy 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.| Dominion Energy vs. Choice Hotels International | Dominion Energy vs. Ping An Insurance | Dominion Energy vs. MELIA HOTELS | Dominion Energy vs. Dalata Hotel Group |
| 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 |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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