Correlation Between Park Hotels and China Oilfield

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

Diversification Opportunities for Park Hotels and China Oilfield

-0.64

Correlation Coefficient

Park Hotels  China Oilfield

Excellent diversification

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

Pair Corralation between Park Hotels and China Oilfield

Assuming the 90 days trading horizon Park Hotels Resorts is expected to generate 1.15 times more return on investment than China Oilfield. However, Park Hotels is 1.15 times more volatile than China Oilfield Services. It trades about 0.06 of its potential returns per unit of risk. China Oilfield Services is currently generating about -0.02 per unit of risk. If you would invest  1,246  in Park Hotels Resorts on October 13, 2024 and sell it today you would earn a total of  84.00  from holding Park Hotels Resorts or generate 6.74% return on investment over 90 days.

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

Park Hotels Resorts  vs.  China Oilfield Services

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 weak basic indicators, Park Hotels may actually be approaching a critical reversion point that can send shares even higher in February 2025.

China Oilfield Services

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Park Hotels Resorts and China Oilfield Services 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.