Correlation Between Park Hotels and Monument Circle

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

Diversification Opportunities for Park Hotels and Monument Circle

-0.57

Correlation Coefficient

Park Hotels  Monument Circle

Excellent diversification

The 3 months correlation between Park and Monument is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Park Hotels Resorts and Monument Circle Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monument Circle Acqu 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 Monument Circle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monument Circle Acqu has no effect on the direction of Park Hotels i.e., Park Hotels and Monument Circle go up and down completely randomly.

Pair Corralation between Park Hotels and Monument Circle

Allowing for the 90-day total investment horizon Park Hotels Resorts is expected to generate 0.07 times more return on investment than Monument Circle. However, Park Hotels Resorts is 14.11 times less risky than Monument Circle. It trades about 0.05 of its potential returns per unit of risk. Monument Circle Acquisition is currently generating about -0.29 per unit of risk. If you would invest  975.00  in Park Hotels Resorts on September 20, 2024 and sell it today you would earn a total of  476.00  from holding Park Hotels Resorts or generate 48.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	2.42%
Values	Daily Returns

Park Hotels Resorts  vs.  Monument Circle Acquisition

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

Monument Circle Acqu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Monument Circle Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Monument Circle is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Park Hotels and Monument Circle

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

The idea behind Park Hotels Resorts and Monument Circle Acquisition 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.