Correlation Between Park Hotels and Real Estate

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

Diversification Opportunities for Park Hotels and Real Estate

-0.4

Correlation Coefficient

Park Hotels  Real Estate

Very good diversification

The 3 months correlation between Park and Real is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Park Hotels Resorts and Real Estate Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Estate Securities 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 Real Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Estate Securities has no effect on the direction of Park Hotels i.e., Park Hotels and Real Estate go up and down completely randomly.

Pair Corralation between Park Hotels and Real Estate

Allowing for the 90-day total investment horizon Park Hotels Resorts is expected to generate 4.0 times more return on investment than Real Estate. However, Park Hotels is 4.0 times more volatile than Real Estate Securities. It trades about 0.26 of its potential returns per unit of risk. Real Estate Securities is currently generating about 0.6 per unit of risk. If you would invest  1,428  in Park Hotels Resorts on September 19, 2024 and sell it today you would earn a total of  112.00  from holding Park Hotels Resorts or generate 7.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	33.33%
Values	Daily Returns

Park Hotels Resorts  vs.  Real Estate Securities

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.

Real Estate Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Real Estate Securities has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Real Estate is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Park Hotels and Real Estate

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

The idea behind Park Hotels Resorts and Real Estate Securities 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.