Correlation Between Park Hotels and Air Products

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

Diversification Opportunities for Park Hotels and Air Products

0.27

Correlation Coefficient

Park Hotels  Air Products

Modest diversification

The 3 months correlation between Park and Air is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Park Hotels Resorts and Air Products Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products Chemicals 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 Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products Chemicals has no effect on the direction of Park Hotels i.e., Park Hotels and Air Products go up and down completely randomly.

Pair Corralation between Park Hotels and Air Products

Assuming the 90 days trading horizon Park Hotels Resorts is expected to generate 0.69 times more return on investment than Air Products. However, Park Hotels Resorts is 1.45 times less risky than Air Products. It trades about 0.04 of its potential returns per unit of risk. Air Products Chemicals is currently generating about 0.02 per unit of risk. If you would invest  1,025  in Park Hotels Resorts on September 15, 2024 and sell it today you would earn a total of  510.00  from holding Park Hotels Resorts or generate 49.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.16%
Values	Daily Returns

Park Hotels Resorts  vs.  Air Products Chemicals

Park Hotels Resorts

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Park Hotels Resorts are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Park Hotels may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Air Products Chemicals

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products Chemicals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Air Products may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Park Hotels and Air Products

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

The idea behind Park Hotels Resorts and Air Products Chemicals 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.