Correlation Between Microsoft and Park Hotels
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Park Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Park Hotels Resorts, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Park Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Park Hotels.
Diversification Opportunities for Microsoft and Park Hotels
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Park is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft 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 Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Park Hotels go up and down completely randomly.
Pair Corralation between Microsoft and Park Hotels
Given the investment horizon of 90 days Microsoft is expected to under-perform the Park Hotels. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.07 times less risky than Park Hotels. The stock trades about -0.05 of its potential returns per unit of risk. The Park Hotels Resorts is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,396 in Park Hotels Resorts on August 27, 2024 and sell it today you would earn a total of 109.00 from holding Park Hotels Resorts or generate 7.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Park Hotels Resorts
Performance |
| Timeline |
| Microsoft |
| Park Hotels Resorts |
Microsoft and Park Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Park Hotels
The main advantage of trading using opposite Microsoft and Park Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. GigaCloud Technology Class | Microsoft vs. Arqit Quantum | Microsoft vs. Cemtrex | Microsoft vs. Paysafe |
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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