Correlation Between Playa Hotels and NexGen Energy
Can any of the company-specific risk be diversified away by investing in both Playa Hotels and NexGen Energy 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 Playa Hotels and NexGen Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Playa Hotels Resorts and NexGen Energy, you can compare the effects of market volatilities on Playa Hotels and NexGen Energy 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 Playa Hotels with a short position of NexGen Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Playa Hotels and NexGen Energy.
Diversification Opportunities for Playa Hotels and NexGen Energy
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Playa and NexGen is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and NexGen Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexGen Energy and Playa 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 Playa Hotels Resorts are associated (or correlated) with NexGen Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NexGen Energy has no effect on the direction of Playa Hotels i.e., Playa Hotels and NexGen Energy go up and down completely randomly.
Pair Corralation between Playa Hotels and NexGen Energy
Assuming the 90 days horizon Playa Hotels Resorts is expected to generate 0.58 times more return on investment than NexGen Energy. However, Playa Hotels Resorts is 1.71 times less risky than NexGen Energy. It trades about 0.19 of its potential returns per unit of risk. NexGen Energy is currently generating about 0.07 per unit of risk. If you would invest 695.00 in Playa Hotels Resorts on September 26, 2024 and sell it today you would earn a total of 210.00 from holding Playa Hotels Resorts or generate 30.22% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Playa Hotels Resorts vs. NexGen Energy
Performance |
Timeline |
Playa Hotels Resorts |
NexGen Energy |
Playa Hotels and NexGen Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Playa Hotels and NexGen Energy
The main advantage of trading using opposite Playa Hotels and NexGen Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Playa Hotels position performs unexpectedly, NexGen Energy 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 NexGen Energy will offset losses from the drop in NexGen Energy's long position.Playa Hotels vs. Las Vegas Sands | Playa Hotels vs. Galaxy Entertainment Group | Playa Hotels vs. Sands China | Playa Hotels vs. MGM Resorts International |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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