Correlation Between United States and Park Hotels

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Can any of the company-specific risk be diversified away by investing in both United States and Park Hotels 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 United States and Park Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and Park Hotels Resorts, you can compare the effects of market volatilities on United States and Park Hotels 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 United States with a short position of Park Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Park Hotels.

Diversification Opportunities for United States and Park Hotels

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between United and Park is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Park Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park Hotels Resorts and United States 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 United States Steel are associated (or correlated) with Park Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Park Hotels Resorts has no effect on the direction of United States i.e., United States and Park Hotels go up and down completely randomly.

Pair Corralation between United States and Park Hotels

Assuming the 90 days trading horizon United States is expected to generate 7.34 times less return on investment than Park Hotels. In addition to that, United States is 1.18 times more volatile than Park Hotels Resorts. It trades about 0.02 of its total potential returns per unit of risk. Park Hotels Resorts is currently generating about 0.15 per unit of volatility. If you would invest  1,216  in Park Hotels Resorts on September 13, 2024 and sell it today you would earn a total of  254.00  from holding Park Hotels Resorts or generate 20.89% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

United States Steel  vs.  Park Hotels Resorts

 Performance 
       Timeline  
United States Steel 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, United States is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Park Hotels Resorts 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Park Hotels Resorts are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Park Hotels unveiled solid returns over the last few months and may actually be approaching a breakup point.

United States and Park Hotels Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with United States and Park Hotels

The main advantage of trading using opposite United States and Park Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States position performs unexpectedly, Park Hotels 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 Park Hotels will offset losses from the drop in Park Hotels' long position.
The idea behind United States Steel and Park Hotels Resorts 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.
Check out your portfolio center.
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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