Correlation Between Apple and Park Hotels

Can any of the company-specific risk be diversified away by investing in both Apple and Park 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 Apple and Park Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Apple Inc and Park Hotels Resorts, you can compare the effects of market volatilities on Apple and Park 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 Apple with a short position of Park Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Park Hotels.

Diversification Opportunities for Apple and Park Hotels

0.81

Correlation Coefficient

Apple  Park Hotels

Very poor diversification

The 3 months correlation between Apple and Park is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Park Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Hotels Resorts and Apple 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 Apple Inc are associated (or correlated) with Park Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Park Hotels Resorts has no effect on the direction of Apple i.e., Apple and Park Hotels go up and down completely randomly.

Pair Corralation between Apple and Park Hotels

Assuming the 90 days trading horizon Apple is expected to generate 1.36 times less return on investment than Park Hotels. But when comparing it to its historical volatility, Apple Inc is 1.69 times less risky than Park Hotels. It trades about 0.2 of its potential returns per unit of risk. Park Hotels Resorts is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,197  in Park Hotels Resorts on September 12, 2024 and sell it today you would earn a total of  273.00  from holding Park Hotels Resorts or generate 22.81% return on investment over 90 days.

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

Apple Inc  vs.  Park Hotels Resorts

Apple Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

Park Hotels Resorts

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Park Hotels Resorts are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Park Hotels unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and Park Hotels

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

The idea behind Apple Inc and Park Hotels Resorts 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.