Correlation Between Park Hotels and Discover Financial
Can any of the company-specific risk be diversified away by investing in both Park Hotels and Discover Financial 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 Discover Financial 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 Discover Financial Services, you can compare the effects of market volatilities on Park Hotels and Discover Financial 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 Discover Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Park Hotels and Discover Financial.
Diversification Opportunities for Park Hotels and Discover Financial
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Park and Discover is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Park Hotels Resorts and Discover Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Discover Financial 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 Discover Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Discover Financial has no effect on the direction of Park Hotels i.e., Park Hotels and Discover Financial go up and down completely randomly.
Pair Corralation between Park Hotels and Discover Financial
Assuming the 90 days trading horizon Park Hotels is expected to generate 1.89 times less return on investment than Discover Financial. But when comparing it to its historical volatility, Park Hotels Resorts is 2.31 times less risky than Discover Financial. It trades about 0.3 of its potential returns per unit of risk. Discover Financial Services is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 15,014 in Discover Financial Services on September 2, 2024 and sell it today you would earn a total of 3,229 from holding Discover Financial Services or generate 21.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Park Hotels Resorts vs. Discover Financial Services
Performance |
| Timeline |
| Park Hotels Resorts |
| Discover Financial |
Park Hotels and Discover Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Park Hotels and Discover Financial
The main advantage of trading using opposite Park Hotels and Discover Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Park Hotels position performs unexpectedly, Discover Financial 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 Discover Financial will offset losses from the drop in Discover Financial's long position.| Park Hotels vs. Uniper SE | Park Hotels vs. Mulberry Group PLC | Park Hotels vs. London Security Plc | Park Hotels vs. Triad Group PLC |
| Discover Financial vs. Uniper SE | Discover Financial vs. Mulberry Group PLC | Discover Financial vs. London Security Plc | Discover Financial vs. Triad Group PLC |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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