Correlation Between Park Hotels and Kilroy Realty

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

Diversification Opportunities for Park Hotels and Kilroy Realty

0.29

Correlation Coefficient

Park Hotels  Kilroy Realty

Modest diversification

The 3 months correlation between Park and Kilroy is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Park Hotels Resorts and Kilroy Realty Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kilroy Realty 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 Kilroy Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kilroy Realty Corp has no effect on the direction of Park Hotels i.e., Park Hotels and Kilroy Realty go up and down completely randomly.

Pair Corralation between Park Hotels and Kilroy Realty

Allowing for the 90-day total investment horizon Park Hotels Resorts is expected to under-perform the Kilroy Realty. But the stock apears to be less risky and, when comparing its historical volatility, Park Hotels Resorts is 1.27 times less risky than Kilroy Realty. The stock trades about -0.02 of its potential returns per unit of risk. The Kilroy Realty Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4,065  in Kilroy Realty Corp on September 23, 2024 and sell it today you would lose (15.00) from holding Kilroy Realty Corp or give up 0.37% of portfolio value over 90 days.

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

Park Hotels Resorts  vs.  Kilroy Realty Corp

Park Hotels Resorts

Risk-Adjusted Performance

0 of 100

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 quite persistent forward-looking signals, Park Hotels is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Kilroy Realty Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kilroy Realty Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Kilroy Realty is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Park Hotels and Kilroy Realty

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

The idea behind Park Hotels Resorts and Kilroy Realty 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.