Correlation Between Park Hotels and BlueScope Steel

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

Diversification Opportunities for Park Hotels and BlueScope Steel

0.03

Correlation Coefficient

Park Hotels  BlueScope Steel

Significant diversification

The 3 months correlation between Park and BlueScope is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Park Hotels Resorts and BlueScope Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueScope Steel 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 BlueScope Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlueScope Steel has no effect on the direction of Park Hotels i.e., Park Hotels and BlueScope Steel go up and down completely randomly.

Pair Corralation between Park Hotels and BlueScope Steel

Assuming the 90 days trading horizon Park Hotels Resorts is expected to generate 0.95 times more return on investment than BlueScope Steel. However, Park Hotels Resorts is 1.05 times less risky than BlueScope Steel. It trades about 0.18 of its potential returns per unit of risk. BlueScope Steel Limited is currently generating about -0.13 per unit of risk. If you would invest  1,330  in Park Hotels Resorts on September 20, 2024 and sell it today you would earn a total of  110.00  from holding Park Hotels Resorts or generate 8.27% return on investment over 90 days.

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

Park Hotels Resorts  vs.  BlueScope Steel Limited

Park Hotels Resorts

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Park Hotels Resorts are ranked lower than 4 (%) 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.

BlueScope Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlueScope Steel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, BlueScope Steel 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 BlueScope Steel

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

The idea behind Park Hotels Resorts and BlueScope Steel Limited 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.