72.15 -0.75 (-1.04%) Sell

Don't buy CHH now, it is a volatile investment

13 min read

CHOICE HOTELS INTERNATIONAL INC ranked among the worst performers on Friday. It lost -1.04% to close at 72.15. On a day when the overall market breadth was 35%, it closed higher than 8% of the market. In comparison, the benchmark SP500 index closed today at -0.0191%.

[Themes containing CHH]

CHH showed a strong down trend over the last 3 months. During this period CHH lost -11.09% and saw a maximum drawdown of -17.96%. There were 2 short signals during this period that returned a cumulative of +8.58% to investors.


CHH has been underperforming the SP500 index in recent time, after having outperformed till 15 Mar, 2018. Over the last 2 years 11 months and 10 days, CHH outperformed the SP500 index on 53% days.

CHH returned losses on 51% days in the last three months. During this time, it delivered on average -0.17% per day. It delivered it's worst daily return of -5.2%, during this period, on Wednesday, 24 Oct, 2018. There was initially a bearish trend during this period which started on 28 Sep, 2018 and went on till 11 Oct, 2018. The trend delivered -11.98% losses to investors. This was followed by a bullish trend that started on 29 Oct, 2018 and ended on 5 Nov, 2018. This bullish trend delivered +8.73% to investors.

CHH had 8 profitable and 4 loss making months over the last year. During the last year, number of profitable months of CHH and SP500 index were the same. CHH was also a more risky investment than SP500 index as it's worst month in the last year, Oct 2018, returned -10.0% compared to -7.28% returned by SP500 index in Oct 2018. CHH had a shorter streak of profitable months than SP500 index. It only went up in 3 straight months during the last year. It is interesting to note that both CHH and SP500 index significantly outperform during months when quarterly/annual results are announced.

If you have trouble imagining a 20% loss in the stock market, you shouldn't be in stocks.
-- John Bogle

CHH is becoming less volatile overall. In comparison, the SP500 index is seeing a rise in volatility. During the last three months, there was a significant surge in CHH's volatility from 17 Sep, 2018 to 8 Nov, 2018. While there was a significant surge in the SP500 index's volatility from 25 Sep, 2018 to 29 Oct, 2018.

Advanced/professional short-term investors should note that CHH has significant positive skewness in it's return distribution. This indicates that investors can expect CHH to recover from drawdowns quickly. Which makes CHH a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.

SP500 index has more chance of extreme outcomes than CHH. Therefore, SP500 must receive a lower allocation than CHH in your portfolio. SP500 index usually has shorter drawdown period than CHH.

On a general note (since you are interested in CHH), three large cap instruments that deserve special mention are UNH, MSFT and AMZN. They have all outperformed the market and must be closely watched for investment opportunities.

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