Correlation Between Park Hotels and Broadstone Net

Can any of the company-specific risk be diversified away by investing in both Park Hotels and Broadstone Net 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 Broadstone Net 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 Broadstone Net Lease, you can compare the effects of market volatilities on Park Hotels and Broadstone Net 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 Broadstone Net. Check out your portfolio center. Please also check ongoing floating volatility patterns of Park Hotels and Broadstone Net.

Diversification Opportunities for Park Hotels and Broadstone Net

-0.46

Correlation Coefficient

Park Hotels  Broadstone Net

Very good diversification

The 3 months correlation between Park and Broadstone is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Park Hotels Resorts and Broadstone Net Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadstone Net Lease 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 Broadstone Net. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadstone Net Lease has no effect on the direction of Park Hotels i.e., Park Hotels and Broadstone Net go up and down completely randomly.

Pair Corralation between Park Hotels and Broadstone Net

Allowing for the 90-day total investment horizon Park Hotels Resorts is expected to generate 1.93 times more return on investment than Broadstone Net. However, Park Hotels is 1.93 times more volatile than Broadstone Net Lease. It trades about -0.02 of its potential returns per unit of risk. Broadstone Net Lease is currently generating about -0.32 per unit of risk. If you would invest  1,505  in Park Hotels Resorts on September 23, 2024 and sell it today you would lose (20.00) from holding Park Hotels Resorts or give up 1.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Park Hotels Resorts  vs.  Broadstone Net Lease

Park Hotels Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Park Hotels Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Park Hotels is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Broadstone Net Lease

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Broadstone Net Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Park Hotels and Broadstone Net

The main advantage of trading using opposite Park Hotels and Broadstone Net positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Park Hotels position performs unexpectedly, Broadstone Net 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 Broadstone Net will offset losses from the drop in Broadstone Net's long position.

The idea behind Park Hotels Resorts and Broadstone Net Lease 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.

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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.