Correlation Between China Southern and Choice Hotels
Can any of the company-specific risk be diversified away by investing in both China Southern 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 China Southern and Choice Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Southern Airlines and Choice Hotels International, you can compare the effects of market volatilities on China Southern 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 China Southern with a short position of Choice Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Southern and Choice Hotels.
Diversification Opportunities for China Southern and Choice Hotels
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between China and Choice is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding China Southern 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 China Southern 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 China Southern 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 China Southern i.e., China Southern and Choice Hotels go up and down completely randomly.
Pair Corralation between China Southern and Choice Hotels
Assuming the 90 days trading horizon China Southern Airlines is expected to under-perform the Choice Hotels. In addition to that, China Southern is 1.52 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 0.05 per unit of volatility. If you would invest 10,086 in Choice Hotels International on September 12, 2024 and sell it today you would earn a total of 3,814 from holding Choice Hotels International or generate 37.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Southern Airlines vs. Choice Hotels International
Performance |
| Timeline |
| China Southern Airlines |
| Choice Hotels Intern |
China Southern and Choice Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Southern and Choice Hotels
The main advantage of trading using opposite China Southern and Choice Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Southern 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.| China Southern vs. Choice Hotels International | China Southern vs. Wyndham Hotels Resorts | China Southern vs. Sunstone Hotel Investors | China Southern vs. Tradegate AG Wertpapierhandelsbank |
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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