Correlation Between Park Hotels and Net Lease

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

Diversification Opportunities for Park Hotels and Net Lease

0.83

Correlation Coefficient

Park Hotels  Net Lease

Very poor diversification

The 3 months correlation between Park and Net is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Park Hotels Resorts and Net Lease Office in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Net Lease Office 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 Net Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Net Lease Office has no effect on the direction of Park Hotels i.e., Park Hotels and Net Lease go up and down completely randomly.

Pair Corralation between Park Hotels and Net Lease

Allowing for the 90-day total investment horizon Park Hotels is expected to generate 2.29 times less return on investment than Net Lease. But when comparing it to its historical volatility, Park Hotels Resorts is 1.95 times less risky than Net Lease. It trades about 0.05 of its potential returns per unit of risk. Net Lease Office is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,906  in Net Lease Office on September 24, 2024 and sell it today you would earn a total of  1,186  from holding Net Lease Office or generate 62.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	58.43%
Values	Daily Returns

Park Hotels Resorts  vs.  Net Lease Office

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.

Net Lease Office

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Net Lease Office has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Net Lease is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Park Hotels and Net Lease

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

The idea behind Park Hotels Resorts and Net Lease Office 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.