Correlation Between Choice Hotels and GreenTree Hospitality

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

Diversification Opportunities for Choice Hotels and GreenTree Hospitality

0.8

Correlation Coefficient

Choice Hotels  GreenTree Hospitality

Very poor diversification

The 3 months correlation between Choice and GreenTree is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and GreenTree Hospitality Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenTree Hospitality 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 GreenTree Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenTree Hospitality has no effect on the direction of Choice Hotels i.e., Choice Hotels and GreenTree Hospitality go up and down completely randomly.

Pair Corralation between Choice Hotels and GreenTree Hospitality

Considering the 90-day investment horizon Choice Hotels International is expected to under-perform the GreenTree Hospitality. But the stock apears to be less risky and, when comparing its historical volatility, Choice Hotels International is 1.21 times less risky than GreenTree Hospitality. The stock trades about -0.11 of its potential returns per unit of risk. The GreenTree Hospitality Group is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  260.00  in GreenTree Hospitality Group on January 23, 2025 and sell it today you would lose (41.00) from holding GreenTree Hospitality Group or give up 15.77% of portfolio value over 90 days.

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

Choice Hotels International  vs.  GreenTree Hospitality Group

Choice Hotels Intern

Risk-Adjusted Performance

Very Weak

Over the last 90 days Choice Hotels International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in May 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

GreenTree Hospitality

Risk-Adjusted Performance

Very Weak

Over the last 90 days GreenTree Hospitality Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Choice Hotels and GreenTree Hospitality

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

The idea behind Choice Hotels International and GreenTree Hospitality Group 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.