Correlation Between Park Hotels and New England

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

Diversification Opportunities for Park Hotels and New England

0.4

Correlation Coefficient

Park Hotels  New England

Very weak diversification

The 3 months correlation between Park and New is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Park Hotels Resorts and New England Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New England Realty 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 New England. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New England Realty has no effect on the direction of Park Hotels i.e., Park Hotels and New England go up and down completely randomly.

Pair Corralation between Park Hotels and New England

Allowing for the 90-day total investment horizon Park Hotels is expected to generate 1.25 times less return on investment than New England. But when comparing it to its historical volatility, Park Hotels Resorts is 1.64 times less risky than New England. It trades about 0.04 of its potential returns per unit of risk. New England Realty is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  8,199  in New England Realty on October 25, 2024 and sell it today you would earn a total of  101.00  from holding New England Realty or generate 1.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	35.0%
Values	Daily Returns

Park Hotels Resorts  vs.  New England Realty

Park Hotels Resorts

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Park Hotels Resorts are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Park Hotels is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

New England Realty

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days New England Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, New England is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Park Hotels and New England

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

The idea behind Park Hotels Resorts and New England Realty 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.