Can any of the company-specific risk be diversified away by investing in both VIRGIN WINES 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 VIRGIN WINES and Choice Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VIRGIN WINES UK and Choice Hotels International, you can compare the effects of market volatilities on VIRGIN WINES 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 VIRGIN WINES with a short position of Choice Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of VIRGIN WINES and Choice Hotels.
Diversification Opportunities for VIRGIN WINES and Choice Hotels
The 3 months correlation between VIRGIN and Choice is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding VIRGIN WINES UK 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 VIRGIN WINES 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 VIRGIN WINES UK 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 VIRGIN WINES i.e., VIRGIN WINES and Choice Hotels go up and down completely randomly.
Pair Corralation between VIRGIN WINES and Choice Hotels
If you would invest 80.00 in VIRGIN WINES UK on March 6, 2024 and sell it today you would earn a total of 0.00 from holding VIRGIN WINES UK or generate 0.0% return on investment over 90 days.
Over the last 90 days VIRGIN WINES UK has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, VIRGIN WINES is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Over the last 90 days Choice Hotels International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Choice Hotels is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.