Correlation Between Playtech Plc and Playa Hotels

Can any of the company-specific risk be diversified away by investing in both Playtech Plc and Playa Hotels 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 Playtech Plc and Playa Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Playtech plc and Playa Hotels Resorts, you can compare the effects of market volatilities on Playtech Plc and Playa Hotels 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 Playtech Plc with a short position of Playa Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Playtech Plc and Playa Hotels.

Diversification Opportunities for Playtech Plc and Playa Hotels

0.85

Correlation Coefficient

Playtech Plc  Playa Hotels

Very poor diversification

The 3 months correlation between Playtech and Playa is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Playtech plc and Playa Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playa Hotels Resorts and Playtech Plc 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 Playtech plc are associated (or correlated) with Playa Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playa Hotels Resorts has no effect on the direction of Playtech Plc i.e., Playtech Plc and Playa Hotels go up and down completely randomly.

Pair Corralation between Playtech Plc and Playa Hotels

Assuming the 90 days horizon Playtech Plc is expected to generate 1.47 times less return on investment than Playa Hotels. In addition to that, Playtech Plc is 1.56 times more volatile than Playa Hotels Resorts. It trades about 0.11 of its total potential returns per unit of risk. Playa Hotels Resorts is currently generating about 0.25 per unit of volatility. If you would invest  765.00  in Playa Hotels Resorts on September 5, 2024 and sell it today you would earn a total of  244.00  from holding Playa Hotels Resorts or generate 31.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Playtech plc  vs.  Playa Hotels Resorts

Playtech plc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Playtech plc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Playtech Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Playa Hotels Resorts

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 19 (%) 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.

Pair Trading with Playtech Plc and Playa Hotels

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

The idea behind Playtech plc and Playa Hotels Resorts 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.