Correlation Between WW International and Choice Hotels

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

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

Diversification Opportunities for WW International and Choice Hotels

-0.2

Correlation Coefficient

WW International  Choice Hotels

Good diversification

The 3 months correlation between WW International and Choice is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding WW International 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 WW International 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 WW International 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 WW International i.e., WW International and Choice Hotels go up and down completely randomly.

Pair Corralation between WW International and Choice Hotels

Allowing for the 90-day total investment horizon WW International is expected to generate 8.6 times more return on investment than Choice Hotels. However, WW International is 8.6 times more volatile than Choice Hotels International. It trades about 0.05 of its potential returns per unit of risk. Choice Hotels International is currently generating about -0.18 per unit of risk. If you would invest  135.00  in WW International on October 14, 2024 and sell it today you would earn a total of  1.00  from holding WW International or generate 0.74% return on investment over 90 days.

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

WW International  vs.  Choice Hotels International

WW International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WW International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, WW International is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Choice Hotels Intern

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Choice Hotels International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Choice Hotels is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with WW International and Choice Hotels

The main advantage of trading using opposite WW International and Choice Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WW International 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 WW International 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.