Correlation Between WILLIS LEASE and Park Hotels

Can any of the company-specific risk be diversified away by investing in both WILLIS LEASE 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 WILLIS LEASE and Park Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WILLIS LEASE FIN and Park Hotels Resorts, you can compare the effects of market volatilities on WILLIS LEASE 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 WILLIS LEASE with a short position of Park Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of WILLIS LEASE and Park Hotels.

Diversification Opportunities for WILLIS LEASE and Park Hotels

0.67

Correlation Coefficient

WILLIS LEASE  Park Hotels

Poor diversification

The 3 months correlation between WILLIS and Park is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding WILLIS LEASE FIN 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 WILLIS LEASE 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 WILLIS LEASE FIN 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 WILLIS LEASE i.e., WILLIS LEASE and Park Hotels go up and down completely randomly.

Pair Corralation between WILLIS LEASE and Park Hotels

Assuming the 90 days horizon WILLIS LEASE FIN is expected to under-perform the Park Hotels. In addition to that, WILLIS LEASE is 1.4 times more volatile than Park Hotels Resorts. It trades about -0.1 of its total potential returns per unit of risk. Park Hotels Resorts is currently generating about -0.09 per unit of volatility. If you would invest  1,341  in Park Hotels Resorts on October 26, 2024 and sell it today you would lose (41.00) from holding Park Hotels Resorts or give up 3.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

WILLIS LEASE FIN  vs.  Park Hotels Resorts

WILLIS LEASE FIN

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WILLIS LEASE FIN are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WILLIS LEASE reported solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of comparatively fragile basic indicators, Park Hotels may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with WILLIS LEASE and Park Hotels

The main advantage of trading using opposite WILLIS LEASE and Park Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WILLIS LEASE 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 WILLIS LEASE FIN 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.

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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.