Correlation Between Jacobs Solutions and Park Hotels

Can any of the company-specific risk be diversified away by investing in both Jacobs Solutions 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 Jacobs Solutions and Park Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jacobs Solutions and Park Hotels Resorts, you can compare the effects of market volatilities on Jacobs Solutions 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 Jacobs Solutions with a short position of Park Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jacobs Solutions and Park Hotels.

Diversification Opportunities for Jacobs Solutions and Park Hotels

0.62

Correlation Coefficient

Jacobs Solutions  Park Hotels

Poor diversification

The 3 months correlation between Jacobs and Park is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions 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 Jacobs Solutions 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 Jacobs Solutions 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 Jacobs Solutions i.e., Jacobs Solutions and Park Hotels go up and down completely randomly.

Pair Corralation between Jacobs Solutions and Park Hotels

Taking into account the 90-day investment horizon Jacobs Solutions is expected to generate 0.57 times more return on investment than Park Hotels. However, Jacobs Solutions is 1.76 times less risky than Park Hotels. It trades about -0.03 of its potential returns per unit of risk. Park Hotels Resorts is currently generating about -0.18 per unit of risk. If you would invest  14,914  in Jacobs Solutions on February 4, 2024 and sell it today you would lose (104.00) from holding Jacobs Solutions or give up 0.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Jacobs Solutions  vs.  Park Hotels Resorts

Jacobs Solutions

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jacobs Solutions are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward-looking indicators, Jacobs Solutions may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Park Hotels Resorts

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Park Hotels Resorts are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent forward-looking signals, Park Hotels may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Jacobs Solutions and Park Hotels

The main advantage of trading using opposite Jacobs Solutions and Park Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jacobs Solutions 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 Jacobs Solutions 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..