Correlation Between Park Hotels and Cairn Homes
Can any of the company-specific risk be diversified away by investing in both Park Hotels and Cairn Homes 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 Cairn Homes 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 Cairn Homes PLC, you can compare the effects of market volatilities on Park Hotels and Cairn Homes 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 Cairn Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Park Hotels and Cairn Homes.
Diversification Opportunities for Park Hotels and Cairn Homes
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Park and Cairn is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Park Hotels Resorts and Cairn Homes PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cairn Homes PLC 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 Cairn Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cairn Homes PLC has no effect on the direction of Park Hotels i.e., Park Hotels and Cairn Homes go up and down completely randomly.
Pair Corralation between Park Hotels and Cairn Homes
Assuming the 90 days trading horizon Park Hotels is expected to generate 2.88 times less return on investment than Cairn Homes. In addition to that, Park Hotels is 1.02 times more volatile than Cairn Homes PLC. It trades about 0.03 of its total potential returns per unit of risk. Cairn Homes PLC is currently generating about 0.09 per unit of volatility. If you would invest 14,225 in Cairn Homes PLC on September 3, 2024 and sell it today you would earn a total of 2,875 from holding Cairn Homes PLC or generate 20.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.22% |
| Values | Daily Returns |
Park Hotels Resorts vs. Cairn Homes PLC
Performance |
| Timeline |
| Park Hotels Resorts |
| Cairn Homes PLC |
Park Hotels and Cairn Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Park Hotels and Cairn Homes
The main advantage of trading using opposite Park Hotels and Cairn Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Park Hotels position performs unexpectedly, Cairn Homes 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 Cairn Homes will offset losses from the drop in Cairn Homes' long position.| Park Hotels vs. JD Sports Fashion | Park Hotels vs. Vitec Software Group | Park Hotels vs. Alliance Data Systems | Park Hotels vs. Ion Beam Applications |
| Cairn Homes vs. Rockfire Resources plc | Cairn Homes vs. Tlou Energy | Cairn Homes vs. Falcon Oil Gas | Cairn Homes vs. Helium One Global |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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