Correlation Between Choice Hotels and Lottery, Warrants

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

Diversification Opportunities for Choice Hotels and Lottery, Warrants

-0.43

Correlation Coefficient

Choice Hotels  Lottery, Warrants

Very good diversification

The 3 months correlation between Choice and Lottery, is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and Lottery, Warrants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lottery, Warrants 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 Lottery, Warrants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lottery, Warrants has no effect on the direction of Choice Hotels i.e., Choice Hotels and Lottery, Warrants go up and down completely randomly.

Pair Corralation between Choice Hotels and Lottery, Warrants

Considering the 90-day investment horizon Choice Hotels is expected to generate 5.98 times less return on investment than Lottery, Warrants. But when comparing it to its historical volatility, Choice Hotels International is 9.34 times less risky than Lottery, Warrants. It trades about 0.09 of its potential returns per unit of risk. Lottery, Warrants is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1.16  in Lottery, Warrants on September 30, 2024 and sell it today you would lose (0.02) from holding Lottery, Warrants or give up 1.72% of portfolio value over 90 days.

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

Choice Hotels International  vs.  Lottery, Warrants

Choice Hotels Intern

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Choice Hotels International are ranked lower than 7 (%) 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.

Lottery, Warrants

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lottery, Warrants are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Lottery, Warrants showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Choice Hotels and Lottery, Warrants

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

The idea behind Choice Hotels International and Lottery, Warrants 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.