Correlation Between Playa Hotels and INTERCONT HOTELS

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

Diversification Opportunities for Playa Hotels and INTERCONT HOTELS

0.96

Correlation Coefficient

Playa Hotels  INTERCONT HOTELS

Almost no diversification

The 3 months correlation between Playa and INTERCONT is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and INTERCONT HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERCONT HOTELS 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 INTERCONT HOTELS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTERCONT HOTELS has no effect on the direction of Playa Hotels i.e., Playa Hotels and INTERCONT HOTELS go up and down completely randomly.

Pair Corralation between Playa Hotels and INTERCONT HOTELS

Assuming the 90 days horizon Playa Hotels Resorts is expected to generate 1.22 times more return on investment than INTERCONT HOTELS. However, Playa Hotels is 1.22 times more volatile than INTERCONT HOTELS. It trades about 0.24 of its potential returns per unit of risk. INTERCONT HOTELS is currently generating about 0.24 per unit of risk. If you would invest  695.00  in Playa Hotels Resorts on September 13, 2024 and sell it today you would earn a total of  280.00  from holding Playa Hotels Resorts or generate 40.29% return on investment over 90 days.

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

Playa Hotels Resorts  vs.  INTERCONT HOTELS

Playa Hotels Resorts

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 18 (%) 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.

INTERCONT HOTELS

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in INTERCONT HOTELS are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, INTERCONT HOTELS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Playa Hotels and INTERCONT HOTELS

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

The idea behind Playa Hotels Resorts and INTERCONT HOTELS 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.