Correlation Between Sterling Construction and Park Hotels
Can any of the company-specific risk be diversified away by investing in both Sterling Construction 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 Sterling Construction and Park Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Construction and Park Hotels Resorts, you can compare the effects of market volatilities on Sterling Construction 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 Sterling Construction with a short position of Park Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Construction and Park Hotels.
Diversification Opportunities for Sterling Construction and Park Hotels
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sterling and Park is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction 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 Sterling Construction 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 Sterling Construction 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 Sterling Construction i.e., Sterling Construction and Park Hotels go up and down completely randomly.
Pair Corralation between Sterling Construction and Park Hotels
Assuming the 90 days horizon Sterling Construction is expected to generate 2.18 times more return on investment than Park Hotels. However, Sterling Construction is 2.18 times more volatile than Park Hotels Resorts. It trades about 0.19 of its potential returns per unit of risk. Park Hotels Resorts is currently generating about -0.09 per unit of risk. If you would invest 16,695 in Sterling Construction on October 24, 2024 and sell it today you would earn a total of 1,990 from holding Sterling Construction or generate 11.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sterling Construction vs. Park Hotels Resorts
Performance |
| Timeline |
| Sterling Construction |
| Park Hotels Resorts |
Sterling Construction and Park Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Construction and Park Hotels
The main advantage of trading using opposite Sterling Construction and Park Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Construction 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.| Sterling Construction vs. BURLINGTON STORES | Sterling Construction vs. Tencent Music Entertainment | Sterling Construction vs. MUTUIONLINE | Sterling Construction vs. Burlington Stores |
| Park Hotels vs. Tokyu Construction Co | Park Hotels vs. Sterling Construction | Park Hotels vs. Daito Trust Construction | Park Hotels vs. Ares Management Corp |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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