Correlation Between Samsung Electronics and Choice Hotels

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

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

Diversification Opportunities for Samsung Electronics and Choice Hotels

-0.77

Correlation Coefficient

Samsung Electronics  Choice Hotels

Pay attention - limited upside

The 3 months correlation between Samsung and Choice is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co 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 Samsung Electronics 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 Samsung Electronics Co 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 Samsung Electronics i.e., Samsung Electronics and Choice Hotels go up and down completely randomly.

Pair Corralation between Samsung Electronics and Choice Hotels

Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the Choice Hotels. In addition to that, Samsung Electronics is 1.34 times more volatile than Choice Hotels International. It trades about -0.31 of its total potential returns per unit of risk. Choice Hotels International is currently generating about -0.09 per unit of volatility. If you would invest  13,800  in Choice Hotels International on September 22, 2024 and sell it today you would lose (400.00) from holding Choice Hotels International or give up 2.9% of portfolio value over 90 days.

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

Samsung Electronics Co  vs.  Choice Hotels International

Samsung Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samsung Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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.

Pair Trading with Samsung Electronics and Choice Hotels

The main advantage of trading using opposite Samsung Electronics and Choice Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung Electronics 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 Samsung Electronics Co 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.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.