Correlation Between Park Hotels and Boston Properties

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

Diversification Opportunities for Park Hotels and Boston Properties

-0.32

Correlation Coefficient

Park Hotels  Boston Properties

Very good diversification

The 3 months correlation between Park and Boston is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Park Hotels Resorts and Boston Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Properties 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 Boston Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Properties has no effect on the direction of Park Hotels i.e., Park Hotels and Boston Properties go up and down completely randomly.

Pair Corralation between Park Hotels and Boston Properties

Allowing for the 90-day total investment horizon Park Hotels Resorts is expected to generate 0.95 times more return on investment than Boston Properties. However, Park Hotels Resorts is 1.05 times less risky than Boston Properties. It trades about -0.02 of its potential returns per unit of risk. Boston Properties is currently generating about -0.16 per unit of risk. If you would invest  1,505  in Park Hotels Resorts on September 23, 2024 and sell it today you would lose (20.00) from holding Park Hotels Resorts or give up 1.33% of portfolio value over 90 days.

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

Park Hotels Resorts  vs.  Boston Properties

Park Hotels Resorts

Risk-Adjusted Performance

0 of 100

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 current stock price mess, may contribute to short-term losses for the institutional investors.

Boston Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boston Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Park Hotels and Boston Properties

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

The idea behind Park Hotels Resorts and Boston Properties 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.