Correlation Between Choice Hotels and CryoLife

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

Diversification Opportunities for Choice Hotels and CryoLife

0.83

Correlation Coefficient

Choice Hotels  CryoLife

Very poor diversification

The 3 months correlation between Choice and CryoLife is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and CryoLife in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CryoLife 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 CryoLife. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CryoLife has no effect on the direction of Choice Hotels i.e., Choice Hotels and CryoLife go up and down completely randomly.

Pair Corralation between Choice Hotels and CryoLife

Assuming the 90 days horizon Choice Hotels International is expected to generate 0.87 times more return on investment than CryoLife. However, Choice Hotels International is 1.14 times less risky than CryoLife. It trades about -0.07 of its potential returns per unit of risk. CryoLife is currently generating about -0.12 per unit of risk. If you would invest  13,870  in Choice Hotels International on October 9, 2024 and sell it today you would lose (270.00) from holding Choice Hotels International or give up 1.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.12%
Values	Daily Returns

Choice Hotels International  vs.  CryoLife

Choice Hotels Intern

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Choice Hotels International are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Choice Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

CryoLife

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CryoLife are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, CryoLife reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Choice Hotels and CryoLife

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

The idea behind Choice Hotels International and CryoLife 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.