Correlation Between InPlay Oil and Playa Hotels

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

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

Diversification Opportunities for InPlay Oil and Playa Hotels

0.17

Correlation Coefficient

InPlay Oil  Playa Hotels

Average diversification

The 3 months correlation between InPlay and Playa is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding InPlay Oil Corp 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 InPlay Oil 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 InPlay Oil Corp 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 InPlay Oil i.e., InPlay Oil and Playa Hotels go up and down completely randomly.

Pair Corralation between InPlay Oil and Playa Hotels

Assuming the 90 days trading horizon InPlay Oil Corp is expected to generate 2.2 times more return on investment than Playa Hotels. However, InPlay Oil is 2.2 times more volatile than Playa Hotels Resorts. It trades about 0.02 of its potential returns per unit of risk. Playa Hotels Resorts is currently generating about 0.05 per unit of risk. If you would invest  102.00  in InPlay Oil Corp on December 30, 2024 and sell it today you would earn a total of  2.00  from holding InPlay Oil Corp or generate 1.96% return on investment over 90 days.

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

InPlay Oil Corp  vs.  Playa Hotels Resorts

InPlay Oil Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in InPlay Oil Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, InPlay Oil is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Playa Hotels Resorts

Risk-Adjusted Performance

Insignificant

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

Pair Trading with InPlay Oil and Playa Hotels

The main advantage of trading using opposite InPlay Oil and Playa Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InPlay Oil 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 InPlay Oil Corp 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.