Correlation Between Park Hotels and Terreno Realty

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

Diversification Opportunities for Park Hotels and Terreno Realty

-0.32

Correlation Coefficient

Park Hotels  Terreno Realty

Very good diversification

The 3 months correlation between Park and Terreno is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Park Hotels Resorts and Terreno Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terreno Realty 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 Terreno Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terreno Realty has no effect on the direction of Park Hotels i.e., Park Hotels and Terreno Realty go up and down completely randomly.

Pair Corralation between Park Hotels and Terreno Realty

Allowing for the 90-day total investment horizon Park Hotels Resorts is expected to generate 1.04 times more return on investment than Terreno Realty. However, Park Hotels is 1.04 times more volatile than Terreno Realty. It trades about 0.07 of its potential returns per unit of risk. Terreno Realty is currently generating about -0.1 per unit of risk. If you would invest  1,410  in Park Hotels Resorts on September 28, 2024 and sell it today you would earn a total of  96.00  from holding Park Hotels Resorts or generate 6.81% 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.  Terreno Realty

Park Hotels Resorts

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Park Hotels Resorts are ranked lower than 5 (%) 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.

Terreno Realty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Terreno Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Park Hotels and Terreno Realty

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

The idea behind Park Hotels Resorts and Terreno Realty 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .