Correlation Between Xenia Hotels and Playa Hotels

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

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

Diversification Opportunities for Xenia Hotels and Playa Hotels

0.7

Correlation Coefficient

Xenia Hotels  Playa Hotels

Poor diversification

The 3 months correlation between Xenia and Playa is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Xenia Hotels Resorts 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 Xenia 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 Xenia Hotels Resorts 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 Xenia Hotels i.e., Xenia Hotels and Playa Hotels go up and down completely randomly.

Pair Corralation between Xenia Hotels and Playa Hotels

Assuming the 90 days trading horizon Xenia Hotels is expected to generate 9.86 times less return on investment than Playa Hotels. But when comparing it to its historical volatility, Xenia Hotels Resorts is 2.08 times less risky than Playa Hotels. It trades about 0.04 of its potential returns per unit of risk. Playa Hotels Resorts is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  715.00  in Playa Hotels Resorts on October 7, 2024 and sell it today you would earn a total of  485.00  from holding Playa Hotels Resorts or generate 67.83% return on investment over 90 days.

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

Xenia Hotels Resorts  vs.  Playa Hotels Resorts

Xenia Hotels Resorts

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xenia Hotels Resorts are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, Xenia Hotels is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Playa Hotels Resorts

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 16 (%) 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.

Pair Trading with Xenia Hotels and Playa Hotels

The main advantage of trading using opposite Xenia Hotels and Playa Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xenia Hotels 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 Xenia Hotels Resorts 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 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.