Correlation Between POSCO Holdings and Choice Hotels
Can any of the company-specific risk be diversified away by investing in both POSCO Holdings 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 POSCO Holdings and Choice Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between POSCO Holdings and Choice Hotels International, you can compare the effects of market volatilities on POSCO Holdings 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 POSCO Holdings with a short position of Choice Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSCO Holdings and Choice Hotels.
Diversification Opportunities for POSCO Holdings and Choice Hotels
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between POSCO and Choice is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings 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 POSCO Holdings 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 POSCO Holdings 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 POSCO Holdings i.e., POSCO Holdings and Choice Hotels go up and down completely randomly.
Pair Corralation between POSCO Holdings and Choice Hotels
Assuming the 90 days horizon POSCO Holdings is expected to generate 1.38 times less return on investment than Choice Hotels. In addition to that, POSCO Holdings is 2.0 times more volatile than Choice Hotels International. It trades about 0.02 of its total potential returns per unit of risk. Choice Hotels International is currently generating about 0.04 per unit of volatility. If you would invest 10,404 in Choice Hotels International on August 31, 2024 and sell it today you would earn a total of 3,696 from holding Choice Hotels International or generate 35.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.38% |
| Values | Daily Returns |
POSCO Holdings vs. Choice Hotels International
Performance |
| Timeline |
| POSCO Holdings |
| Choice Hotels Intern |
POSCO Holdings and Choice Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with POSCO Holdings and Choice Hotels
The main advantage of trading using opposite POSCO Holdings and Choice Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO Holdings 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 POSCO Holdings 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.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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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