Correlation Between ULTRA CLEAN and Choice Hotels

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

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

Diversification Opportunities for ULTRA CLEAN and Choice Hotels

0.49

Correlation Coefficient

ULTRA CLEAN  Choice Hotels

Very weak diversification

The 3 months correlation between ULTRA and Choice is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding ULTRA CLEAN HLDGS 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 ULTRA CLEAN 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 ULTRA CLEAN HLDGS 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 ULTRA CLEAN i.e., ULTRA CLEAN and Choice Hotels go up and down completely randomly.

Pair Corralation between ULTRA CLEAN and Choice Hotels

Assuming the 90 days trading horizon ULTRA CLEAN is expected to generate 1.09 times less return on investment than Choice Hotels. In addition to that, ULTRA CLEAN is 2.1 times more volatile than Choice Hotels International. It trades about 0.09 of its total potential returns per unit of risk. Choice Hotels International is currently generating about 0.21 per unit of volatility. If you would invest  10,873  in Choice Hotels International on September 13, 2024 and sell it today you would earn a total of  2,527  from holding Choice Hotels International or generate 23.24% return on investment over 90 days.

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

ULTRA CLEAN HLDGS  vs.  Choice Hotels International

ULTRA CLEAN HLDGS

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ULTRA CLEAN HLDGS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, ULTRA CLEAN exhibited solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with ULTRA CLEAN and Choice Hotels

The main advantage of trading using opposite ULTRA CLEAN and Choice Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ULTRA CLEAN 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 ULTRA CLEAN HLDGS 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.