Correlation Between Playa Hotels and TransAlta

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

Diversification Opportunities for Playa Hotels and TransAlta

0.69

Correlation Coefficient

Playa Hotels  TransAlta

Poor diversification

The 3 months correlation between Playa and TransAlta is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and TransAlta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransAlta 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 TransAlta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TransAlta has no effect on the direction of Playa Hotels i.e., Playa Hotels and TransAlta go up and down completely randomly.

Pair Corralation between Playa Hotels and TransAlta

Assuming the 90 days horizon Playa Hotels Resorts is expected to under-perform the TransAlta. But the stock apears to be less risky and, when comparing its historical volatility, Playa Hotels Resorts is 1.63 times less risky than TransAlta. The stock trades about -0.01 of its potential returns per unit of risk. The TransAlta is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest  1,044  in TransAlta on September 29, 2024 and sell it today you would earn a total of  319.00  from holding TransAlta or generate 30.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Playa Hotels Resorts  vs.  TransAlta

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.

TransAlta

Risk-Adjusted Performance

18 of 100

Solid

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

Pair Trading with Playa Hotels and TransAlta

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

The idea behind Playa Hotels Resorts and TransAlta 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..