Correlation Between Park Hotels and Sunstone Hotel

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

Diversification Opportunities for Park Hotels and Sunstone Hotel

0.75

Correlation Coefficient

Park Hotels  Sunstone Hotel

Poor diversification

The 3 months correlation between Park and Sunstone is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Park Hotels Resorts and Sunstone Hotel Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunstone Hotel Investors 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 Sunstone Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunstone Hotel Investors has no effect on the direction of Park Hotels i.e., Park Hotels and Sunstone Hotel go up and down completely randomly.

Pair Corralation between Park Hotels and Sunstone Hotel

Allowing for the 90-day total investment horizon Park Hotels Resorts is expected to generate 1.24 times more return on investment than Sunstone Hotel. However, Park Hotels is 1.24 times more volatile than Sunstone Hotel Investors. It trades about 0.04 of its potential returns per unit of risk. Sunstone Hotel Investors is currently generating about 0.05 per unit of risk. If you would invest  1,502  in Park Hotels Resorts on August 30, 2024 and sell it today you would earn a total of  54.00  from holding Park Hotels Resorts or generate 3.6% return on investment over 90 days.

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

Park Hotels Resorts  vs.  Sunstone Hotel Investors

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.

Sunstone Hotel Investors

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sunstone Hotel Investors are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, Sunstone Hotel is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Park Hotels and Sunstone Hotel

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

The idea behind Park Hotels Resorts and Sunstone Hotel Investors 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.