Correlation Between Playa Hotels and Wayside Technology

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

Diversification Opportunities for Playa Hotels and Wayside Technology

0.95

Correlation Coefficient

Playa Hotels  Wayside Technology

Almost no diversification

The 3 months correlation between Playa and Wayside is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and Wayside Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wayside Technology 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 Wayside Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wayside Technology has no effect on the direction of Playa Hotels i.e., Playa Hotels and Wayside Technology go up and down completely randomly.

Pair Corralation between Playa Hotels and Wayside Technology

Assuming the 90 days horizon Playa Hotels is expected to generate 1.19 times less return on investment than Wayside Technology. But when comparing it to its historical volatility, Playa Hotels Resorts is 1.96 times less risky than Wayside Technology. It trades about 0.29 of its potential returns per unit of risk. Wayside Technology Group is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  11,500  in Wayside Technology Group on September 17, 2024 and sell it today you would earn a total of  1,100  from holding Wayside Technology Group or generate 9.57% 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.  Wayside Technology Group

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.

Wayside Technology

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wayside Technology Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Wayside Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Playa Hotels and Wayside Technology

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

The idea behind Playa Hotels Resorts and Wayside Technology Group 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.