Correlation Between Choice Hotels and Vonovia SE
Can any of the company-specific risk be diversified away by investing in both Choice Hotels and Vonovia SE 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 Vonovia SE 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 Vonovia SE, you can compare the effects of market volatilities on Choice Hotels and Vonovia SE 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 Vonovia SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Hotels and Vonovia SE.
Diversification Opportunities for Choice Hotels and Vonovia SE
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Choice and Vonovia is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and Vonovia SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vonovia SE 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 Vonovia SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vonovia SE has no effect on the direction of Choice Hotels i.e., Choice Hotels and Vonovia SE go up and down completely randomly.
Pair Corralation between Choice Hotels and Vonovia SE
Assuming the 90 days horizon Choice Hotels International is expected to generate 0.88 times more return on investment than Vonovia SE. However, Choice Hotels International is 1.14 times less risky than Vonovia SE. It trades about -0.07 of its potential returns per unit of risk. Vonovia SE is currently generating about -0.12 per unit of risk. If you would invest 13,272 in Choice Hotels International on December 30, 2024 and sell it today you would lose (1,072) from holding Choice Hotels International or give up 8.08% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Choice Hotels International vs. Vonovia SE
Performance |
Timeline |
Choice Hotels Intern |
Vonovia SE |
Choice Hotels and Vonovia SE Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Choice Hotels and Vonovia SE
The main advantage of trading using opposite Choice Hotels and Vonovia SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels position performs unexpectedly, Vonovia SE 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 Vonovia SE will offset losses from the drop in Vonovia SE's long position.Choice Hotels vs. British American Tobacco | Choice Hotels vs. EBRO FOODS | Choice Hotels vs. AIR PRODCHEMICALS | Choice Hotels vs. SENECA FOODS A |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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