Correlation Between Playa Hotels and Bannerman Resources

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

Diversification Opportunities for Playa Hotels and Bannerman Resources

-0.73

Correlation Coefficient

Playa Hotels  Bannerman Resources

Pay attention - limited upside

The 3 months correlation between Playa and Bannerman is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and Bannerman Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bannerman Resources 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 Bannerman Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bannerman Resources has no effect on the direction of Playa Hotels i.e., Playa Hotels and Bannerman Resources go up and down completely randomly.

Pair Corralation between Playa Hotels and Bannerman Resources

Assuming the 90 days horizon Playa Hotels Resorts is expected to under-perform the Bannerman Resources. But the stock apears to be less risky and, when comparing its historical volatility, Playa Hotels Resorts is 1.93 times less risky than Bannerman Resources. The stock trades about -0.02 of its potential returns per unit of risk. The Bannerman Resources Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  169.00  in Bannerman Resources Limited on September 26, 2024 and sell it today you would earn a total of  3.00  from holding Bannerman Resources Limited or generate 1.78% return on investment over 90 days.

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

Playa Hotels Resorts  vs.  Bannerman Resources Limited

Playa Hotels Resorts

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 14 (%) 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.

Bannerman Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bannerman Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Playa Hotels and Bannerman Resources

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

The idea behind Playa Hotels Resorts and Bannerman Resources Limited 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.