Correlation Between Choice Hotels and Impala Platinum

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

Diversification Opportunities for Choice Hotels and Impala Platinum

0.37

Correlation Coefficient

Choice Hotels  Impala Platinum

Weak diversification

The 3 months correlation between Choice and Impala is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and Impala Platinum Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Impala Platinum Holdings 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 Impala Platinum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Impala Platinum Holdings has no effect on the direction of Choice Hotels i.e., Choice Hotels and Impala Platinum go up and down completely randomly.

Pair Corralation between Choice Hotels and Impala Platinum

Assuming the 90 days horizon Choice Hotels International is expected to generate 0.4 times more return on investment than Impala Platinum. However, Choice Hotels International is 2.49 times less risky than Impala Platinum. It trades about 0.22 of its potential returns per unit of risk. Impala Platinum Holdings is currently generating about 0.08 per unit of risk. If you would invest  11,073  in Choice Hotels International on September 15, 2024 and sell it today you would earn a total of  2,727  from holding Choice Hotels International or generate 24.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.48%
Values	Daily Returns

Choice Hotels International  vs.  Impala Platinum Holdings

Choice Hotels Intern

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Choice Hotels International are ranked lower than 16 (%) 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.

Impala Platinum Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Impala Platinum Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical indicators, Impala Platinum reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Choice Hotels and Impala Platinum

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

The idea behind Choice Hotels International and Impala Platinum Holdings 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 Global Correlations module to find global opportunities by holding instruments from different markets.