Correlation Between Choice Hotels and Atour Lifestyle

Can any of the company-specific risk be diversified away by investing in both Choice Hotels and Atour Lifestyle 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 Atour Lifestyle 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 Atour Lifestyle Holdings, you can compare the effects of market volatilities on Choice Hotels and Atour Lifestyle 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 Atour Lifestyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Hotels and Atour Lifestyle.

Diversification Opportunities for Choice Hotels and Atour Lifestyle

0.41

Correlation Coefficient

Choice Hotels  Atour Lifestyle

Very weak diversification

The 3 months correlation between Choice and Atour is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and Atour Lifestyle Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atour Lifestyle Holdings 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 Atour Lifestyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atour Lifestyle Holdings has no effect on the direction of Choice Hotels i.e., Choice Hotels and Atour Lifestyle go up and down completely randomly.

Pair Corralation between Choice Hotels and Atour Lifestyle

Considering the 90-day investment horizon Choice Hotels is expected to generate 2.09 times less return on investment than Atour Lifestyle. But when comparing it to its historical volatility, Choice Hotels International is 2.07 times less risky than Atour Lifestyle. It trades about 0.16 of its potential returns per unit of risk. Atour Lifestyle Holdings is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,974  in Atour Lifestyle Holdings on September 16, 2024 and sell it today you would earn a total of  727.00  from holding Atour Lifestyle Holdings or generate 36.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Choice Hotels International  vs.  Atour Lifestyle Holdings

Choice Hotels Intern

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Choice Hotels International are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Choice Hotels demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Atour Lifestyle Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Atour Lifestyle Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Atour Lifestyle unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Choice Hotels and Atour Lifestyle

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

The idea behind Choice Hotels International and Atour Lifestyle Holdings 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.

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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.