Correlation Between Hyatt Hotels and Choice Hotels

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Can any of the company-specific risk be diversified away by investing in both Hyatt Hotels 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 Hyatt Hotels and Choice Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hyatt Hotels and Choice Hotels International, you can compare the effects of market volatilities on Hyatt Hotels 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 Hyatt Hotels with a short position of Choice Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyatt Hotels and Choice Hotels.

Diversification Opportunities for Hyatt Hotels and Choice Hotels

0.42
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Hyatt and Choice is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Hyatt Hotels 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 Hyatt 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 Hyatt Hotels 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 Hyatt Hotels i.e., Hyatt Hotels and Choice Hotels go up and down completely randomly.

Pair Corralation between Hyatt Hotels and Choice Hotels

Taking into account the 90-day investment horizon Hyatt Hotels is expected to generate 1.16 times more return on investment than Choice Hotels. However, Hyatt Hotels is 1.16 times more volatile than Choice Hotels International. It trades about 0.07 of its potential returns per unit of risk. Choice Hotels International is currently generating about 0.01 per unit of risk. If you would invest  9,363  in Hyatt Hotels on December 29, 2023 and sell it today you would earn a total of  6,721  from holding Hyatt Hotels or generate 71.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Hyatt Hotels  vs.  Choice Hotels International

 Performance 
       Timeline  
Hyatt Hotels 

Risk-Adjusted Performance

15 of 100

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

Risk-Adjusted Performance

10 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Choice Hotels International are ranked lower than 10 (%) 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.

Hyatt Hotels and Choice Hotels Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hyatt Hotels and Choice Hotels

The main advantage of trading using opposite Hyatt Hotels and Choice Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyatt Hotels 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 Hyatt Hotels 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.
Check out your portfolio center.
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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