Correlation Between Wendys and Park Hotels
Can any of the company-specific risk be diversified away by investing in both Wendys 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 Wendys and Park Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Wendys Co and Park Hotels Resorts, you can compare the effects of market volatilities on Wendys 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 Wendys with a short position of Park Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wendys and Park Hotels.
Diversification Opportunities for Wendys and Park Hotels
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Wendys and Park is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding The Wendys Co 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 Wendys 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 The Wendys Co 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 Wendys i.e., Wendys and Park Hotels go up and down completely randomly.
Pair Corralation between Wendys and Park Hotels
Considering the 90-day investment horizon Wendys is expected to generate 8.8 times less return on investment than Park Hotels. But when comparing it to its historical volatility, The Wendys Co is 1.21 times less risky than Park Hotels. It trades about 0.01 of its potential returns per unit of risk. Park Hotels Resorts is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,031 in Park Hotels Resorts on August 29, 2024 and sell it today you would earn a total of 525.00 from holding Park Hotels Resorts or generate 50.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Wendys Co vs. Park Hotels Resorts
Performance |
| Timeline |
| The Wendys |
| Park Hotels Resorts |
Wendys and Park Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wendys and Park Hotels
The main advantage of trading using opposite Wendys and Park Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wendys 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.The idea behind The Wendys Co and Park Hotels Resorts pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Park Hotels vs. Diamondrock Hospitality | Park Hotels vs. Ryman Hospitality Properties | Park Hotels vs. Pebblebrook Hotel Trust | Park Hotels vs. Sunstone Hotel Investors |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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