Correlation Between Park Hotels and CenterPoint Energy

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

Diversification Opportunities for Park Hotels and CenterPoint Energy

0.73

Correlation Coefficient

Park Hotels  CenterPoint Energy

Poor diversification

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

Pair Corralation between Park Hotels and CenterPoint Energy

Allowing for the 90-day total investment horizon Park Hotels Resorts is expected to generate 1.63 times more return on investment than CenterPoint Energy. However, Park Hotels is 1.63 times more volatile than CenterPoint Energy. It trades about 0.05 of its potential returns per unit of risk. CenterPoint Energy is currently generating about 0.02 per unit of risk. If you would invest  985.00  in Park Hotels Resorts on September 28, 2024 and sell it today you would earn a total of  514.50  from holding Park Hotels Resorts or generate 52.23% return on investment over 90 days.

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

Park Hotels Resorts  vs.  CenterPoint Energy

Park Hotels Resorts

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Park Hotels Resorts are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent forward-looking signals, Park Hotels may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CenterPoint Energy

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CenterPoint Energy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, CenterPoint Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Park Hotels and CenterPoint Energy

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

The idea behind Park Hotels Resorts and CenterPoint Energy 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.