Correlation Between Park Hotels and Micron Technology

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

Diversification Opportunities for Park Hotels and Micron Technology

0.07

Correlation Coefficient

Park Hotels  Micron Technology

Significant diversification

The 3 months correlation between Park and Micron is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Park Hotels Resorts and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology 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 Micron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micron Technology has no effect on the direction of Park Hotels i.e., Park Hotels and Micron Technology go up and down completely randomly.

Pair Corralation between Park Hotels and Micron Technology

Assuming the 90 days trading horizon Park Hotels Resorts is expected to generate 0.42 times more return on investment than Micron Technology. However, Park Hotels Resorts is 2.38 times less risky than Micron Technology. It trades about -0.06 of its potential returns per unit of risk. Micron Technology is currently generating about -0.13 per unit of risk. If you would invest  1,450  in Park Hotels Resorts on September 25, 2024 and sell it today you would lose (40.00) from holding Park Hotels Resorts or give up 2.76% of portfolio value over 90 days.

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

Park Hotels Resorts  vs.  Micron Technology

Park Hotels Resorts

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Park Hotels Resorts are ranked lower than 7 (%) 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.

Micron Technology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Micron Technology is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Park Hotels and Micron Technology

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

The idea behind Park Hotels Resorts and Micron Technology 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..