Correlation Between SINGAPORE AIRLINES and Choice Hotels
Can any of the company-specific risk be diversified away by investing in both SINGAPORE AIRLINES 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 SINGAPORE AIRLINES and Choice Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SINGAPORE AIRLINES and Choice Hotels International, you can compare the effects of market volatilities on SINGAPORE AIRLINES 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 SINGAPORE AIRLINES with a short position of Choice Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of SINGAPORE AIRLINES and Choice Hotels.
Diversification Opportunities for SINGAPORE AIRLINES and Choice Hotels
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between SINGAPORE and Choice is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding SINGAPORE AIRLINES 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 SINGAPORE AIRLINES 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 SINGAPORE AIRLINES 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 SINGAPORE AIRLINES i.e., SINGAPORE AIRLINES and Choice Hotels go up and down completely randomly.
Pair Corralation between SINGAPORE AIRLINES and Choice Hotels
Assuming the 90 days trading horizon SINGAPORE AIRLINES is expected to generate 12.05 times less return on investment than Choice Hotels. But when comparing it to its historical volatility, SINGAPORE AIRLINES is 1.21 times less risky than Choice Hotels. It trades about 0.03 of its potential returns per unit of risk. Choice Hotels International is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 12,900 in Choice Hotels International on August 30, 2024 and sell it today you would earn a total of 1,400 from holding Choice Hotels International or generate 10.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
SINGAPORE AIRLINES vs. Choice Hotels International
Performance |
| Timeline |
| SINGAPORE AIRLINES |
| Choice Hotels Intern |
SINGAPORE AIRLINES and Choice Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SINGAPORE AIRLINES and Choice Hotels
The main advantage of trading using opposite SINGAPORE AIRLINES and Choice Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SINGAPORE AIRLINES 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.| SINGAPORE AIRLINES vs. Apple Inc | SINGAPORE AIRLINES vs. Apple Inc | SINGAPORE AIRLINES vs. Superior Plus Corp | SINGAPORE AIRLINES vs. SIVERS SEMICONDUCTORS AB |
| Choice Hotels vs. FLOW TRADERS LTD | Choice Hotels vs. Waste Management | Choice Hotels vs. The Trade Desk | Choice Hotels vs. Coor Service Management |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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