Correlation Between CITY OFFICE and Playa Hotels

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

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

Diversification Opportunities for CITY OFFICE and Playa Hotels

0.33

Correlation Coefficient

CITY OFFICE  Playa Hotels

Weak diversification

The 3 months correlation between CITY and Playa is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding CITY OFFICE REIT and Playa Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playa Hotels Resorts and CITY OFFICE 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 CITY OFFICE REIT are associated (or correlated) with Playa Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playa Hotels Resorts has no effect on the direction of CITY OFFICE i.e., CITY OFFICE and Playa Hotels go up and down completely randomly.

Pair Corralation between CITY OFFICE and Playa Hotels

Assuming the 90 days horizon CITY OFFICE is expected to generate 3.2 times less return on investment than Playa Hotels. In addition to that, CITY OFFICE is 1.23 times more volatile than Playa Hotels Resorts. It trades about 0.05 of its total potential returns per unit of risk. Playa Hotels Resorts is currently generating about 0.19 per unit of volatility. If you would invest  690.00  in Playa Hotels Resorts on September 29, 2024 and sell it today you would earn a total of  215.00  from holding Playa Hotels Resorts or generate 31.16% return on investment over 90 days.

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

CITY OFFICE REIT  vs.  Playa Hotels Resorts

CITY OFFICE REIT

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CITY OFFICE REIT are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CITY OFFICE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Playa Hotels Resorts

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Playa Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CITY OFFICE and Playa Hotels

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

The idea behind CITY OFFICE REIT and Playa 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.