Correlation Between Park Hotels and Aqua America

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

Diversification Opportunities for Park Hotels and Aqua America

0.64

Correlation Coefficient

Park Hotels  Aqua America

Poor diversification

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

Pair Corralation between Park Hotels and Aqua America

Assuming the 90 days trading horizon Park Hotels Resorts is expected to generate 1.69 times more return on investment than Aqua America. However, Park Hotels is 1.69 times more volatile than Aqua America. It trades about 0.04 of its potential returns per unit of risk. Aqua America is currently generating about -0.02 per unit of risk. If you would invest  985.00  in Park Hotels Resorts on October 4, 2024 and sell it today you would earn a total of  340.00  from holding Park Hotels Resorts or generate 34.52% 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.  Aqua America

Park Hotels Resorts

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Park Hotels Resorts are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Park Hotels is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Aqua America

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aqua America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Aqua America is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Park Hotels and Aqua America

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

The idea behind Park Hotels Resorts and Aqua America 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.