Correlation Between Park Hotels and Western Asset

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

Diversification Opportunities for Park Hotels and Western Asset

-0.22

Correlation Coefficient

Park Hotels  Western Asset

Very good diversification

The 3 months correlation between Park and Western is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Park Hotels Resorts and Western Asset Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Investment 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Investment has no effect on the direction of Park Hotels i.e., Park Hotels and Western Asset go up and down completely randomly.

Pair Corralation between Park Hotels and Western Asset

Allowing for the 90-day total investment horizon Park Hotels Resorts is expected to generate 2.92 times more return on investment than Western Asset. However, Park Hotels is 2.92 times more volatile than Western Asset Investment. It trades about 0.05 of its potential returns per unit of risk. Western Asset Investment is currently generating about 0.05 per unit of risk. If you would invest  1,251  in Park Hotels Resorts on September 15, 2024 and sell it today you would earn a total of  277.00  from holding Park Hotels Resorts or generate 22.14% return on investment over 90 days.

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

Park Hotels Resorts  vs.  Western Asset Investment

Park Hotels Resorts

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Park Hotels Resorts are ranked lower than 7 (%) 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.

Western Asset Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Western Asset is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Park Hotels and Western Asset

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

The idea behind Park Hotels Resorts and Western Asset Investment 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.