Correlation Between Choice Hotels and Biglari Holdings
Can any of the company-specific risk be diversified away by investing in both Choice Hotels and Biglari Holdings 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 Biglari Holdings 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 Biglari Holdings, you can compare the effects of market volatilities on Choice Hotels and Biglari Holdings 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 Biglari Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Hotels and Biglari Holdings.
Diversification Opportunities for Choice Hotels and Biglari Holdings
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Choice and Biglari is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and Biglari Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biglari 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 Biglari Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biglari Holdings has no effect on the direction of Choice Hotels i.e., Choice Hotels and Biglari Holdings go up and down completely randomly.
Pair Corralation between Choice Hotels and Biglari Holdings
Considering the 90-day investment horizon Choice Hotels International is expected to under-perform the Biglari Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Choice Hotels International is 2.7 times less risky than Biglari Holdings. The stock trades about -0.32 of its potential returns per unit of risk. The Biglari Holdings is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 20,698 in Biglari Holdings on September 26, 2024 and sell it today you would earn a total of 5,757 from holding Biglari Holdings or generate 27.81% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Choice Hotels International vs. Biglari Holdings
Performance |
Timeline |
Choice Hotels Intern |
Biglari Holdings |
Choice Hotels and Biglari Holdings Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Choice Hotels and Biglari Holdings
The main advantage of trading using opposite Choice Hotels and Biglari Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels position performs unexpectedly, Biglari Holdings 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 Biglari Holdings will offset losses from the drop in Biglari Holdings' long position.Choice Hotels vs. Biglari Holdings | Choice Hotels vs. Smart Share Global | Choice Hotels vs. Sweetgreen | Choice Hotels vs. WW International |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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