Correlation Between Playa Hotels and CBAAU

Can any of the company-specific risk be diversified away by investing in both Playa Hotels and CBAAU 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 CBAAU 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 CBAAU 5079 10 JAN 25, you can compare the effects of market volatilities on Playa Hotels and CBAAU 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 CBAAU. Check out your portfolio center. Please also check ongoing floating volatility patterns of Playa Hotels and CBAAU.

Diversification Opportunities for Playa Hotels and CBAAU

0.68

Correlation Coefficient

Playa Hotels  CBAAU

Poor diversification

The 3 months correlation between Playa and CBAAU is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and CBAAU 5079 10 JAN 25 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CBAAU 5079 10 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 CBAAU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CBAAU 5079 10 has no effect on the direction of Playa Hotels i.e., Playa Hotels and CBAAU go up and down completely randomly.

Pair Corralation between Playa Hotels and CBAAU

Given the investment horizon of 90 days Playa Hotels Resorts is expected to generate 45.42 times more return on investment than CBAAU. However, Playa Hotels is 45.42 times more volatile than CBAAU 5079 10 JAN 25. It trades about 0.26 of its potential returns per unit of risk. CBAAU 5079 10 JAN 25 is currently generating about -0.05 per unit of risk. If you would invest  767.00  in Playa Hotels Resorts on September 14, 2024 and sell it today you would earn a total of  248.00  from holding Playa Hotels Resorts or generate 32.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	63.49%
Values	Daily Returns

Playa Hotels Resorts  vs.  CBAAU 5079 10 JAN 25

Playa Hotels Resorts

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Playa Hotels sustained solid returns over the last few months and may actually be approaching a breakup point.

CBAAU 5079 10

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CBAAU 5079 10 JAN 25 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CBAAU is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Playa Hotels and CBAAU

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

The idea behind Playa Hotels Resorts and CBAAU 5079 10 JAN 25 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.