Correlation Between Park Hotels and Elme Communities

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

Diversification Opportunities for Park Hotels and Elme Communities

-0.83

Correlation Coefficient

Park Hotels  Elme Communities

Pay attention - limited upside

The 3 months correlation between Park and Elme is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Park Hotels Resorts and Elme Communities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elme Communities 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 Elme Communities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elme Communities has no effect on the direction of Park Hotels i.e., Park Hotels and Elme Communities go up and down completely randomly.

Pair Corralation between Park Hotels and Elme Communities

Allowing for the 90-day total investment horizon Park Hotels Resorts is expected to under-perform the Elme Communities. But the stock apears to be less risky and, when comparing its historical volatility, Park Hotels Resorts is 1.04 times less risky than Elme Communities. The stock trades about -0.21 of its potential returns per unit of risk. The Elme Communities is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,484  in Elme Communities on December 26, 2024 and sell it today you would earn a total of  252.00  from holding Elme Communities or generate 16.98% return on investment over 90 days.

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

Park Hotels Resorts  vs.  Elme Communities

Park Hotels Resorts

Risk-Adjusted Performance

Very Weak

Over the last 90 days Park Hotels Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Elme Communities

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elme Communities are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, Elme Communities exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Park Hotels and Elme Communities

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

The idea behind Park Hotels Resorts and Elme Communities 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.