Correlation Between Wingstop and Choice Hotels
Can any of the company-specific risk be diversified away by investing in both Wingstop 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 Wingstop and Choice Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wingstop and Choice Hotels International, you can compare the effects of market volatilities on Wingstop 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 Wingstop with a short position of Choice Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wingstop and Choice Hotels.
Diversification Opportunities for Wingstop and Choice Hotels
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Wingstop and Choice is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Wingstop 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 Wingstop 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 Wingstop 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 Wingstop i.e., Wingstop and Choice Hotels go up and down completely randomly.
Pair Corralation between Wingstop and Choice Hotels
Given the investment horizon of 90 days Wingstop is expected to generate 1.6 times more return on investment than Choice Hotels. However, Wingstop is 1.6 times more volatile than Choice Hotels International. It trades about 0.08 of its potential returns per unit of risk. Choice Hotels International is currently generating about 0.04 per unit of risk. If you would invest 15,673 in Wingstop on August 26, 2024 and sell it today you would earn a total of 18,087 from holding Wingstop or generate 115.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wingstop vs. Choice Hotels International
Performance |
| Timeline |
| Wingstop |
| Choice Hotels Intern |
Wingstop and Choice Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wingstop and Choice Hotels
The main advantage of trading using opposite Wingstop and Choice Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wingstop 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.| Wingstop vs. Papa Johns International | Wingstop vs. Chipotle Mexican Grill | Wingstop vs. The Wendys Co | Wingstop vs. Dominos Pizza |
| 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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