Correlation Between Choice Hotels and HUTCHISON TELECOMM

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

Diversification Opportunities for Choice Hotels and HUTCHISON TELECOMM

-0.26

Correlation Coefficient

Choice Hotels  HUTCHISON TELECOMM

Very good diversification

The 3 months correlation between Choice and HUTCHISON is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and HUTCHISON TELECOMM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUTCHISON TELECOMM 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 HUTCHISON TELECOMM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUTCHISON TELECOMM has no effect on the direction of Choice Hotels i.e., Choice Hotels and HUTCHISON TELECOMM go up and down completely randomly.

Pair Corralation between Choice Hotels and HUTCHISON TELECOMM

Assuming the 90 days horizon Choice Hotels International is expected to generate 0.31 times more return on investment than HUTCHISON TELECOMM. However, Choice Hotels International is 3.18 times less risky than HUTCHISON TELECOMM. It trades about 0.04 of its potential returns per unit of risk. HUTCHISON TELECOMM is currently generating about -0.01 per unit of risk. If you would invest  10,774  in Choice Hotels International on October 11, 2024 and sell it today you would earn a total of  2,926  from holding Choice Hotels International or generate 27.16% return on investment over 90 days.

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

Choice Hotels International  vs.  HUTCHISON TELECOMM

Choice Hotels Intern

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Choice Hotels International are ranked lower than 11 (%) 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.

HUTCHISON TELECOMM

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days HUTCHISON TELECOMM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, HUTCHISON TELECOMM is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Choice Hotels and HUTCHISON TELECOMM

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

The idea behind Choice Hotels International and HUTCHISON TELECOMM 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.