Correlation Between China DatangRenewable and Park Hotels

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

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

Diversification Opportunities for China DatangRenewable and Park Hotels

-0.34

Correlation Coefficient

China DatangRenewable  Park Hotels

Very good diversification

The 3 months correlation between China and Park is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding China Datang 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 China DatangRenewable 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 China Datang 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 China DatangRenewable i.e., China DatangRenewable and Park Hotels go up and down completely randomly.

Pair Corralation between China DatangRenewable and Park Hotels

Assuming the 90 days horizon China Datang is expected to generate 1.85 times more return on investment than Park Hotels. However, China DatangRenewable is 1.85 times more volatile than Park Hotels Resorts. It trades about 0.04 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  25.00  in China Datang on December 19, 2024 and sell it today you would earn a total of  1.00  from holding China Datang or generate 4.0% return on investment over 90 days.

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

China Datang  vs.  Park Hotels Resorts

China DatangRenewable

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Datang are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, China DatangRenewable may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with China DatangRenewable and Park Hotels

The main advantage of trading using opposite China DatangRenewable and Park Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China DatangRenewable 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 China Datang 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.