Correlation Between Park Hotels and Office Properties

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

Diversification Opportunities for Park Hotels and Office Properties

0.83

Correlation Coefficient

Park Hotels  Office Properties

Very poor diversification

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

Pair Corralation between Park Hotels and Office Properties

Allowing for the 90-day total investment horizon Park Hotels Resorts is expected to under-perform the Office Properties. But the stock apears to be less risky and, when comparing its historical volatility, Park Hotels Resorts is 1.55 times less risky than Office Properties. The stock trades about -0.2 of its potential returns per unit of risk. The Office Properties Income is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  1,171  in Office Properties Income on December 26, 2024 and sell it today you would lose (248.00) from holding Office Properties Income or give up 21.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Park Hotels Resorts  vs.  Office Properties Income

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.

Office Properties Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Office Properties Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators 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.

Pair Trading with Park Hotels and Office Properties

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

The idea behind Park Hotels Resorts and Office Properties Income 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.