Correlation Between Diversified Healthcare and Park Hotels

Can any of the company-specific risk be diversified away by investing in both Diversified Healthcare and Park Hotels 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 Diversified Healthcare and Park Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Diversified Healthcare Trust and Park Hotels Resorts, you can compare the effects of market volatilities on Diversified Healthcare and Park Hotels 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 Diversified Healthcare with a short position of Park Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diversified Healthcare and Park Hotels.

Diversification Opportunities for Diversified Healthcare and Park Hotels

-0.64

Correlation Coefficient

Diversified Healthcare  Park Hotels

Excellent diversification

The 3 months correlation between Diversified and Park is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Diversified Healthcare Trust and Park Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Hotels Resorts and Diversified Healthcare 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 Diversified Healthcare Trust are associated (or correlated) with Park Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Park Hotels Resorts has no effect on the direction of Diversified Healthcare i.e., Diversified Healthcare and Park Hotels go up and down completely randomly.

Pair Corralation between Diversified Healthcare and Park Hotels

Considering the 90-day investment horizon Diversified Healthcare Trust is expected to generate 1.86 times more return on investment than Park Hotels. However, Diversified Healthcare is 1.86 times more volatile than Park Hotels Resorts. It trades about 0.07 of its potential returns per unit of risk. Park Hotels Resorts is currently generating about -0.2 per unit of risk. If you would invest  223.00  in Diversified Healthcare Trust on December 29, 2024 and sell it today you would earn a total of  24.00  from holding Diversified Healthcare Trust or generate 10.76% return on investment over 90 days.

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

Diversified Healthcare Trust  vs.  Park Hotels Resorts

Diversified Healthcare

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Diversified Healthcare Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, Diversified Healthcare exhibited solid returns over the last few months and may actually be approaching a breakup point.

Park Hotels Resorts

Risk-Adjusted Performance

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 inconsistent performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Diversified Healthcare and Park Hotels

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

The idea behind Diversified Healthcare Trust and Park Hotels Resorts 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.