Correlation Between KEISEI EL and Park Hotels

Can any of the company-specific risk be diversified away by investing in both KEISEI EL and Park Hotels 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 KEISEI EL and Park Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KEISEI EL RAILWAY and Park Hotels Resorts, you can compare the effects of market volatilities on KEISEI EL and Park Hotels 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 KEISEI EL with a short position of Park Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of KEISEI EL and Park Hotels.

Diversification Opportunities for KEISEI EL and Park Hotels

0.08

Correlation Coefficient

KEISEI EL  Park Hotels

Significant diversification

The 3 months correlation between KEISEI and Park is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding KEISEI EL RAILWAY and Park Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Hotels Resorts and KEISEI EL 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 KEISEI EL RAILWAY are associated (or correlated) with Park Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Park Hotels Resorts has no effect on the direction of KEISEI EL i.e., KEISEI EL and Park Hotels go up and down completely randomly.

Pair Corralation between KEISEI EL and Park Hotels

Assuming the 90 days trading horizon KEISEI EL RAILWAY is expected to generate 2.44 times more return on investment than Park Hotels. However, KEISEI EL is 2.44 times more volatile than Park Hotels Resorts. It trades about 0.04 of its potential returns per unit of risk. Park Hotels Resorts is currently generating about 0.05 per unit of risk. If you would invest  696.00  in KEISEI EL RAILWAY on September 27, 2024 and sell it today you would earn a total of  151.00  from holding KEISEI EL RAILWAY or generate 21.7% return on investment over 90 days.

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

KEISEI EL RAILWAY  vs.  Park Hotels Resorts

KEISEI EL RAILWAY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KEISEI EL RAILWAY 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 forward indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Park Hotels Resorts

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Park Hotels Resorts are ranked lower than 6 (%) 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.

Pair Trading with KEISEI EL and Park Hotels

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

The idea behind KEISEI EL RAILWAY and Park Hotels Resorts 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.