Correlation Between Playa Hotels and Weibo Corp

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

Diversification Opportunities for Playa Hotels and Weibo Corp

0.17

Correlation Coefficient

Playa Hotels  Weibo Corp

Average diversification

The 3 months correlation between Playa and Weibo is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and Weibo Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weibo Corp 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 Weibo Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weibo Corp has no effect on the direction of Playa Hotels i.e., Playa Hotels and Weibo Corp go up and down completely randomly.

Pair Corralation between Playa Hotels and Weibo Corp

Given the investment horizon of 90 days Playa Hotels is expected to generate 1.34 times less return on investment than Weibo Corp. But when comparing it to its historical volatility, Playa Hotels Resorts is 2.28 times less risky than Weibo Corp. It trades about 0.26 of its potential returns per unit of risk. Weibo Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  726.00  in Weibo Corp on September 12, 2024 and sell it today you would earn a total of  303.00  from holding Weibo Corp or generate 41.74% return on investment over 90 days.

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

Playa Hotels Resorts  vs.  Weibo Corp

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.

Weibo Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Weibo Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, Weibo Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Playa Hotels and Weibo Corp

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

The idea behind Playa Hotels Resorts and Weibo Corp 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 Global Correlations module to find global opportunities by holding instruments from different markets.