Correlation Between Premier Foods and Park Hotels
Can any of the company-specific risk be diversified away by investing in both Premier Foods 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 Premier Foods and Park Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Premier Foods PLC and Park Hotels Resorts, you can compare the effects of market volatilities on Premier Foods 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 Premier Foods with a short position of Park Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premier Foods and Park Hotels.
Diversification Opportunities for Premier Foods and Park Hotels
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Premier and Park is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Premier Foods PLC 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 Premier Foods 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 Premier Foods PLC 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 Premier Foods i.e., Premier Foods and Park Hotels go up and down completely randomly.
Pair Corralation between Premier Foods and Park Hotels
Assuming the 90 days trading horizon Premier Foods is expected to generate 1.04 times less return on investment than Park Hotels. But when comparing it to its historical volatility, Premier Foods PLC is 2.63 times less risky than Park Hotels. It trades about 0.1 of its potential returns per unit of risk. Park Hotels Resorts is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,088 in Park Hotels Resorts on September 2, 2024 and sell it today you would earn a total of 472.00 from holding Park Hotels Resorts or generate 43.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 93.39% |
| Values | Daily Returns |
Premier Foods PLC vs. Park Hotels Resorts
Performance |
| Timeline |
| Premier Foods PLC |
| Park Hotels Resorts |
Premier Foods and Park Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Premier Foods and Park Hotels
The main advantage of trading using opposite Premier Foods and Park Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premier Foods 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.| Premier Foods vs. Samsung Electronics Co | Premier Foods vs. Samsung Electronics Co | Premier Foods vs. Hyundai Motor | Premier Foods vs. Toyota Motor Corp |
| Park Hotels vs. Uniper SE | Park Hotels vs. Mulberry Group PLC | Park Hotels vs. London Security Plc | Park Hotels 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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