Correlation Between Choice Hotels and Cytokinetics

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

Diversification Opportunities for Choice Hotels and Cytokinetics

-0.59
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Choice and Cytokinetics is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and Cytokinetics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cytokinetics 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 Cytokinetics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cytokinetics has no effect on the direction of Choice Hotels i.e., Choice Hotels and Cytokinetics go up and down completely randomly.

Pair Corralation between Choice Hotels and Cytokinetics

Considering the 90-day investment horizon Choice Hotels is expected to generate 4.45 times less return on investment than Cytokinetics. But when comparing it to its historical volatility, Choice Hotels International is 2.2 times less risky than Cytokinetics. It trades about 0.03 of its potential returns per unit of risk. Cytokinetics is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,988  in Cytokinetics on September 1, 2022 and sell it today you would earn a total of  2,262  from holding Cytokinetics or generate 113.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Choice Hotels International  vs.  Cytokinetics

 Performance (%) 
       Timeline  
Choice Hotels Intern 
Choice Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Choice Hotels International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical indicators, Choice Hotels may actually be approaching a critical reversion point that can send shares even higher in December 2022.

Choice Price Channel

Cytokinetics 
Cytokinetics Performance
0 of 100
Over the last 90 days Cytokinetics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2022. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Cytokinetics Price Channel

Choice Hotels and Cytokinetics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Choice Hotels and Cytokinetics

The main advantage of trading using opposite Choice Hotels and Cytokinetics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels position performs unexpectedly, Cytokinetics 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 Cytokinetics will offset losses from the drop in Cytokinetics' long position.
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The idea behind Choice Hotels International and Cytokinetics 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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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 Analyst Recommendations module to analyst recommendations and target price estimates broken down by several categories.

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