Correlation Between Park Hotels and American Healthcare

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

Diversification Opportunities for Park Hotels and American Healthcare

0.73
  Correlation Coefficient

Poor diversification

The 3 months correlation between Park and American is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Park Hotels Resorts and American Healthcare REIT, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Healthcare REIT, 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 American Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Healthcare REIT, has no effect on the direction of Park Hotels i.e., Park Hotels and American Healthcare go up and down completely randomly.

Pair Corralation between Park Hotels and American Healthcare

Allowing for the 90-day total investment horizon Park Hotels is expected to generate 25.02 times less return on investment than American Healthcare. But when comparing it to its historical volatility, Park Hotels Resorts is 1.04 times less risky than American Healthcare. It trades about 0.01 of its potential returns per unit of risk. American Healthcare REIT, is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,516  in American Healthcare REIT, on September 19, 2024 and sell it today you would earn a total of  319.00  from holding American Healthcare REIT, or generate 12.68% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Park Hotels Resorts  vs.  American Healthcare REIT,

 Performance 
       Timeline  
Park Hotels Resorts 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Park Hotels Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Park Hotels is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.
American Healthcare REIT, 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in American Healthcare REIT, are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical indicators, American Healthcare reported solid returns over the last few months and may actually be approaching a breakup point.

Park Hotels and American Healthcare Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Park Hotels and American Healthcare

The main advantage of trading using opposite Park Hotels and American Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Park Hotels position performs unexpectedly, American Healthcare 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 American Healthcare will offset losses from the drop in American Healthcare's long position.
The idea behind Park Hotels Resorts and American Healthcare REIT, 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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