Correlation Between Playa Hotels and Caesars Entertainment

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

Diversification Opportunities for Playa Hotels and Caesars Entertainment

-0.05

Correlation Coefficient

Playa Hotels  Caesars Entertainment

Good diversification

The 3 months correlation between Playa and Caesars is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and Caesars Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caesars Entertainment 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 Caesars Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caesars Entertainment has no effect on the direction of Playa Hotels i.e., Playa Hotels and Caesars Entertainment go up and down completely randomly.

Pair Corralation between Playa Hotels and Caesars Entertainment

Given the investment horizon of 90 days Playa Hotels Resorts is expected to generate 0.73 times more return on investment than Caesars Entertainment. However, Playa Hotels Resorts is 1.36 times less risky than Caesars Entertainment. It trades about 0.22 of its potential returns per unit of risk. Caesars Entertainment is currently generating about 0.05 per unit of risk. If you would invest  769.00  in Playa Hotels Resorts on September 2, 2024 and sell it today you would earn a total of  210.00  from holding Playa Hotels Resorts or generate 27.31% return on investment over 90 days.

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

Playa Hotels Resorts  vs.  Caesars Entertainment

Playa Hotels Resorts

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Playa Hotels sustained solid returns over the last few months and may actually be approaching a breakup point.

Caesars Entertainment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Caesars Entertainment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Caesars Entertainment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Playa Hotels and Caesars Entertainment

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

The idea behind Playa Hotels Resorts and Caesars Entertainment 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.