Correlation Between Park Hotels and Universal Music

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

Diversification Opportunities for Park Hotels and Universal Music

-0.44

Correlation Coefficient

Park Hotels  Universal Music

Very good diversification

The 3 months correlation between Park and Universal is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Park Hotels Resorts and Universal Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Music Group 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 Universal Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Music Group has no effect on the direction of Park Hotels i.e., Park Hotels and Universal Music go up and down completely randomly.

Pair Corralation between Park Hotels and Universal Music

Allowing for the 90-day total investment horizon Park Hotels Resorts is expected to generate 1.4 times more return on investment than Universal Music. However, Park Hotels is 1.4 times more volatile than Universal Music Group. It trades about 0.01 of its potential returns per unit of risk. Universal Music Group is currently generating about -0.02 per unit of risk. If you would invest  1,366  in Park Hotels Resorts on October 10, 2024 and sell it today you would earn a total of  0.00  from holding Park Hotels Resorts or generate 0.0% return on investment over 90 days.

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

Park Hotels Resorts  vs.  Universal Music Group

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 recent stock price mess, may contribute to short-term losses for the institutional investors.

Universal Music Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Music Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Universal Music is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Park Hotels and Universal Music

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

The idea behind Park Hotels Resorts and Universal Music Group 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.