Correlation Between Park Hotels and National Beverage

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

Diversification Opportunities for Park Hotels and National Beverage

0.89

Correlation Coefficient

Park Hotels  National Beverage

Very poor diversification

The 3 months correlation between Park and National is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Park Hotels Resorts and National Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Beverage Corp 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 National Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Beverage Corp has no effect on the direction of Park Hotels i.e., Park Hotels and National Beverage go up and down completely randomly.

Pair Corralation between Park Hotels and National Beverage

Allowing for the 90-day total investment horizon Park Hotels Resorts is expected to under-perform the National Beverage. But the stock apears to be less risky and, when comparing its historical volatility, Park Hotels Resorts is 1.4 times less risky than National Beverage. The stock trades about -0.27 of its potential returns per unit of risk. The National Beverage Corp is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  4,109  in National Beverage Corp on December 3, 2024 and sell it today you would lose (126.00) from holding National Beverage Corp or give up 3.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Park Hotels Resorts  vs.  National Beverage Corp

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.

National Beverage Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Beverage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Park Hotels and National Beverage

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

The idea behind Park Hotels Resorts and National Beverage Corp 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.