Correlation Between Knife River and Park Hotels

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

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

Diversification Opportunities for Knife River and Park Hotels

0.43

Correlation Coefficient

Knife River  Park Hotels

Very weak diversification

The 3 months correlation between Knife and Park is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Knife River 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 Knife River 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 Knife River 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 Knife River i.e., Knife River and Park Hotels go up and down completely randomly.

Pair Corralation between Knife River and Park Hotels

Considering the 90-day investment horizon Knife River is expected to generate 1.21 times more return on investment than Park Hotels. However, Knife River is 1.21 times more volatile than Park Hotels Resorts. It trades about 0.23 of its potential returns per unit of risk. Park Hotels Resorts is currently generating about 0.07 per unit of risk. If you would invest  7,568  in Knife River on September 1, 2024 and sell it today you would earn a total of  2,782  from holding Knife River or generate 36.76% return on investment over 90 days.

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

Knife River  vs.  Park Hotels Resorts

Knife River

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Knife River are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Knife River reported solid returns over the last few months and may actually be approaching a breakup point.

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. Despite quite inconsistent forward-looking signals, Park Hotels may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Knife River and Park Hotels

The main advantage of trading using opposite Knife River and Park Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knife River 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 Knife River 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.