Correlation Between Park Hotels and Linde Plc

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

Diversification Opportunities for Park Hotels and Linde Plc

-0.33

Correlation Coefficient

Park Hotels  Linde Plc

Very good diversification

The 3 months correlation between Park and Linde is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Park Hotels Resorts and Linde plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linde plc 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 Linde Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linde plc has no effect on the direction of Park Hotels i.e., Park Hotels and Linde Plc go up and down completely randomly.

Pair Corralation between Park Hotels and Linde Plc

Assuming the 90 days trading horizon Park Hotels Resorts is expected to under-perform the Linde Plc. In addition to that, Park Hotels is 2.91 times more volatile than Linde plc. It trades about -0.2 of its total potential returns per unit of risk. Linde plc is currently generating about -0.36 per unit of volatility. If you would invest  41,900  in Linde plc on October 10, 2024 and sell it today you would lose (1,920) from holding Linde plc or give up 4.58% of portfolio value over 90 days.

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

Park Hotels Resorts  vs.  Linde plc

Park Hotels Resorts

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Park Hotels Resorts are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Park Hotels may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Linde plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Linde plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Park Hotels and Linde Plc

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

The idea behind Park Hotels Resorts and Linde plc 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.