Correlation Between Smart Share and Choice Hotels

Can any of the company-specific risk be diversified away by investing in both Smart Share and Choice Hotels 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 Smart Share and Choice Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Smart Share Global and Choice Hotels International, you can compare the effects of market volatilities on Smart Share and Choice Hotels 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 Smart Share with a short position of Choice Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smart Share and Choice Hotels.

Diversification Opportunities for Smart Share and Choice Hotels

0.03

Correlation Coefficient

Smart Share  Choice Hotels

Significant diversification

The 3 months correlation between Smart and Choice is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Smart Share Global and Choice Hotels International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choice Hotels Intern and Smart Share 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 Smart Share Global are associated (or correlated) with Choice Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choice Hotels Intern has no effect on the direction of Smart Share i.e., Smart Share and Choice Hotels go up and down completely randomly.

Pair Corralation between Smart Share and Choice Hotels

Allowing for the 90-day total investment horizon Smart Share Global is expected to under-perform the Choice Hotels. In addition to that, Smart Share is 2.9 times more volatile than Choice Hotels International. It trades about -0.01 of its total potential returns per unit of risk. Choice Hotels International is currently generating about 0.04 per unit of volatility. If you would invest  11,011  in Choice Hotels International on September 26, 2024 and sell it today you would earn a total of  3,060  from holding Choice Hotels International or generate 27.79% return on investment over 90 days.

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

Smart Share Global  vs.  Choice Hotels International

Smart Share Global

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Smart Share Global are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Smart Share is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Choice Hotels Intern

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Choice Hotels International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Choice Hotels may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Smart Share and Choice Hotels

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

The idea behind Smart Share Global and Choice Hotels International 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.