Correlation Between Playa Hotels and Holmen AB

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

Diversification Opportunities for Playa Hotels and Holmen AB

-0.81

Correlation Coefficient

Playa Hotels  Holmen AB

Pay attention - limited upside

The 3 months correlation between Playa and Holmen is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and Holmen AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holmen AB 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 Holmen AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holmen AB has no effect on the direction of Playa Hotels i.e., Playa Hotels and Holmen AB go up and down completely randomly.

Pair Corralation between Playa Hotels and Holmen AB

Assuming the 90 days horizon Playa Hotels Resorts is expected to generate 1.3 times more return on investment than Holmen AB. However, Playa Hotels is 1.3 times more volatile than Holmen AB. It trades about -0.03 of its potential returns per unit of risk. Holmen AB is currently generating about -0.05 per unit of risk. If you would invest  915.00  in Playa Hotels Resorts on September 28, 2024 and sell it today you would lose (10.00) from holding Playa Hotels Resorts or give up 1.09% of portfolio value over 90 days.

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

Playa Hotels Resorts  vs.  Holmen AB

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.

Holmen AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Holmen AB 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 Holmen AB

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

The idea behind Playa Hotels Resorts and Holmen AB 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..