Correlation Between Huazhu and Choice Hotels
Can any of the company-specific risk be diversified away by investing in both Huazhu 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 Huazhu and Choice Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Huazhu Group and Choice Hotels International, you can compare the effects of market volatilities on Huazhu 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 Huazhu with a short position of Choice Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huazhu and Choice Hotels.
Diversification Opportunities for Huazhu and Choice Hotels
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Huazhu and Choice is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Huazhu Group 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 Huazhu 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 Huazhu Group 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 Huazhu i.e., Huazhu and Choice Hotels go up and down completely randomly.
Pair Corralation between Huazhu and Choice Hotels
Given the investment horizon of 90 days Huazhu is expected to generate 37.26 times less return on investment than Choice Hotels. In addition to that, Huazhu is 1.81 times more volatile than Choice Hotels International. It trades about 0.0 of its total potential returns per unit of risk. Choice Hotels International is currently generating about 0.16 per unit of volatility. If you would invest 11,145 in Choice Hotels International on August 24, 2024 and sell it today you would earn a total of 3,785 from holding Choice Hotels International or generate 33.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Huazhu Group vs. Choice Hotels International
Performance |
| Timeline |
| Huazhu Group |
| Choice Hotels Intern |
Huazhu and Choice Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Huazhu and Choice Hotels
The main advantage of trading using opposite Huazhu and Choice Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Huazhu 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.| Huazhu vs. GreenTree Hospitality Group | Huazhu vs. Soho House Co | Huazhu vs. InterContinental Hotels Group | Huazhu vs. The Intergroup |
| Choice Hotels vs. Hyatt Hotels | Choice Hotels vs. Hilton Worldwide Holdings | Choice Hotels vs. InterContinental Hotels Group | Choice Hotels vs. Marriott International |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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