Correlation Between Soho House and Choice Hotels

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

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

Diversification Opportunities for Soho House and Choice Hotels

-0.38

Correlation Coefficient

Soho House  Choice Hotels

Very good diversification

The 3 months correlation between Soho and Choice is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Soho House 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 Soho House 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 Soho House 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 Soho House i.e., Soho House and Choice Hotels go up and down completely randomly.

Pair Corralation between Soho House and Choice Hotels

Given the investment horizon of 90 days Soho House Co is expected to under-perform the Choice Hotels. In addition to that, Soho House is 1.88 times more volatile than Choice Hotels International. It trades about -0.05 of its total potential returns per unit of risk. Choice Hotels International is currently generating about 0.19 per unit of volatility. If you would invest  12,612  in Choice Hotels International on September 2, 2024 and sell it today you would earn a total of  2,512  from holding Choice Hotels International or generate 19.92% return on investment over 90 days.

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

Soho House Co  vs.  Choice Hotels International

Soho House

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Soho House Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Choice Hotels Intern

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Choice Hotels International are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Choice Hotels demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Soho House and Choice Hotels

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

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.