Correlation Between Park Hotels and Equity Commonwealth

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

Diversification Opportunities for Park Hotels and Equity Commonwealth

-0.39

Correlation Coefficient

Park Hotels  Equity Commonwealth

Very good diversification

The 3 months correlation between Park and Equity is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Park Hotels Resorts and Equity Commonwealth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Commonwealth 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 Equity Commonwealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Commonwealth has no effect on the direction of Park Hotels i.e., Park Hotels and Equity Commonwealth go up and down completely randomly.

Pair Corralation between Park Hotels and Equity Commonwealth

Allowing for the 90-day total investment horizon Park Hotels Resorts is expected to generate 0.09 times more return on investment than Equity Commonwealth. However, Park Hotels Resorts is 10.7 times less risky than Equity Commonwealth. It trades about -0.04 of its potential returns per unit of risk. Equity Commonwealth is currently generating about -0.17 per unit of risk. If you would invest  1,536  in Park Hotels Resorts on September 27, 2024 and sell it today you would lose (29.00) from holding Park Hotels Resorts or give up 1.89% 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.  Equity Commonwealth

Park Hotels Resorts

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Park Hotels Resorts are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Equity Commonwealth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equity Commonwealth has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Park Hotels and Equity Commonwealth

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

The idea behind Park Hotels Resorts and Equity Commonwealth 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.