Correlation Between Park Hotels and Gentex

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

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

Diversification Opportunities for Park Hotels and Gentex

0.72

Correlation Coefficient

Park Hotels  Gentex

Poor diversification

The 3 months correlation between Park and Gentex is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Park Hotels Resorts and Gentex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentex and Park 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 Park Hotels Resorts are associated (or correlated) with Gentex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gentex has no effect on the direction of Park Hotels i.e., Park Hotels and Gentex go up and down completely randomly.

Pair Corralation between Park Hotels and Gentex

Assuming the 90 days trading horizon Park Hotels Resorts is expected to under-perform the Gentex. In addition to that, Park Hotels is 1.36 times more volatile than Gentex. It trades about -0.1 of its total potential returns per unit of risk. Gentex is currently generating about -0.04 per unit of volatility. If you would invest  2,840  in Gentex on September 23, 2024 and sell it today you would lose (40.00) from holding Gentex or give up 1.41% of portfolio value over 90 days.

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

Park Hotels Resorts  vs.  Gentex

Park Hotels Resorts

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Park Hotels Resorts are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Park Hotels is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Gentex

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gentex are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Gentex is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Park Hotels and Gentex

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

The idea behind Park Hotels Resorts and Gentex 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.