Correlation Between Choice Hotels and Ark Restaurants

Can any of the company-specific risk be diversified away by investing in both Choice Hotels and Ark Restaurants 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 Choice Hotels and Ark Restaurants into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Choice Hotels International and Ark Restaurants Corp, you can compare the effects of market volatilities on Choice Hotels and Ark Restaurants 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 Choice Hotels with a short position of Ark Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Hotels and Ark Restaurants.

Diversification Opportunities for Choice Hotels and Ark Restaurants

-0.19

Correlation Coefficient

Choice Hotels  Ark Restaurants

Good diversification

The 3 months correlation between Choice and Ark is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and Ark Restaurants Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ark Restaurants Corp and Choice Hotels 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 Choice Hotels International are associated (or correlated) with Ark Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ark Restaurants Corp has no effect on the direction of Choice Hotels i.e., Choice Hotels and Ark Restaurants go up and down completely randomly.

Pair Corralation between Choice Hotels and Ark Restaurants

Considering the 90-day investment horizon Choice Hotels International is expected to generate 0.52 times more return on investment than Ark Restaurants. However, Choice Hotels International is 1.94 times less risky than Ark Restaurants. It trades about 0.03 of its potential returns per unit of risk. Ark Restaurants Corp is currently generating about 0.0 per unit of risk. If you would invest  11,941  in Choice Hotels International on October 21, 2024 and sell it today you would earn a total of  2,233  from holding Choice Hotels International or generate 18.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.59%
Values	Daily Returns

Choice Hotels International  vs.  Ark Restaurants Corp

Choice Hotels Intern

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Choice Hotels International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Choice Hotels is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Ark Restaurants Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ark Restaurants Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent forward-looking signals, Ark Restaurants reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Choice Hotels and Ark Restaurants

The main advantage of trading using opposite Choice Hotels and Ark Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels position performs unexpectedly, Ark Restaurants 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 Ark Restaurants will offset losses from the drop in Ark Restaurants' long position.

The idea behind Choice Hotels International and Ark Restaurants Corp 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.