Correlation Between Park Hotels and Churchill

Can any of the company-specific risk be diversified away by investing in both Park Hotels and Churchill 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 Churchill 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 Churchill Downs 55, you can compare the effects of market volatilities on Park Hotels and Churchill 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 Churchill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Park Hotels and Churchill.

Diversification Opportunities for Park Hotels and Churchill

-0.31

Correlation Coefficient

Park Hotels  Churchill

Very good diversification

The 3 months correlation between Park and Churchill is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Park Hotels Resorts and Churchill Downs 55 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Churchill Downs 55 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 Churchill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Churchill Downs 55 has no effect on the direction of Park Hotels i.e., Park Hotels and Churchill go up and down completely randomly.

Pair Corralation between Park Hotels and Churchill

Allowing for the 90-day total investment horizon Park Hotels is expected to generate 19.85 times less return on investment than Churchill. But when comparing it to its historical volatility, Park Hotels Resorts is 23.19 times less risky than Churchill. It trades about 0.05 of its potential returns per unit of risk. Churchill Downs 55 is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  9,660  in Churchill Downs 55 on September 2, 2024 and sell it today you would lose (79.00) from holding Churchill Downs 55 or give up 0.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	89.11%
Values	Daily Returns

Park Hotels Resorts  vs.  Churchill Downs 55

Park Hotels Resorts

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Park Hotels Resorts are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, Park Hotels may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Churchill Downs 55

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Churchill Downs 55 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Churchill 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 Churchill

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

The idea behind Park Hotels Resorts and Churchill Downs 55 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.