Correlation Between PayPal Holdings and Choice Hotels
Can any of the company-specific risk be diversified away by investing in both PayPal 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 PayPal 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 PayPal Holdings and Choice Hotels International, you can compare the effects of market volatilities on PayPal 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 PayPal Holdings with a short position of Choice Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and Choice Hotels.
Diversification Opportunities for PayPal Holdings and Choice Hotels
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between PayPal and Choice is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding PayPal 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 PayPal 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 PayPal 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 PayPal Holdings i.e., PayPal Holdings and Choice Hotels go up and down completely randomly.
Pair Corralation between PayPal Holdings and Choice Hotels
Given the investment horizon of 90 days PayPal Holdings is expected to generate 1.52 times more return on investment than Choice Hotels. However, PayPal Holdings is 1.52 times more volatile than Choice Hotels International. It trades about 0.27 of its potential returns per unit of risk. Choice Hotels International is currently generating about 0.36 per unit of risk. If you would invest 7,930 in PayPal Holdings on September 1, 2024 and sell it today you would earn a total of 747.00 from holding PayPal Holdings or generate 9.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
PayPal Holdings vs. Choice Hotels International
Performance |
| Timeline |
| PayPal Holdings |
| Choice Hotels Intern |
PayPal Holdings and Choice Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PayPal Holdings and Choice Hotels
The main advantage of trading using opposite PayPal Holdings and Choice Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal 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.| PayPal Holdings vs. SoFi Technologies | PayPal Holdings vs. Visa Class A | PayPal Holdings vs. Mastercard | PayPal Holdings vs. Capital One Financial |
| 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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