Correlation Between Park Hotels and Brown Forman

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

Diversification Opportunities for Park Hotels and Brown Forman

0.76

Correlation Coefficient

Park Hotels  Brown Forman

Poor diversification

The 3 months correlation between Park and Brown is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Park Hotels Resorts and Brown Forman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Forman 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 Brown Forman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Forman has no effect on the direction of Park Hotels i.e., Park Hotels and Brown Forman go up and down completely randomly.

Pair Corralation between Park Hotels and Brown Forman

Assuming the 90 days trading horizon Park Hotels Resorts is expected to generate 0.86 times more return on investment than Brown Forman. However, Park Hotels Resorts is 1.17 times less risky than Brown Forman. It trades about -0.02 of its potential returns per unit of risk. Brown Forman is currently generating about -0.07 per unit of risk. If you would invest  1,138  in Park Hotels Resorts on December 10, 2024 and sell it today you would lose (68.00) from holding Park Hotels Resorts or give up 5.98% of portfolio value over 90 days.

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

Park Hotels Resorts  vs.  Brown Forman

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. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Brown Forman

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brown Forman has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile 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 Park Hotels and Brown Forman

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

The idea behind Park Hotels Resorts and Brown Forman 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.