Correlation Between PLAYTIKA HOLDING and DiamondRock Hospitality

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

By analyzing existing cross correlation between PLAYTIKA HOLDING DL 01 and DiamondRock Hospitality, you can compare the effects of market volatilities on PLAYTIKA HOLDING and DiamondRock Hospitality 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 PLAYTIKA HOLDING with a short position of DiamondRock Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of PLAYTIKA HOLDING and DiamondRock Hospitality.

Diversification Opportunities for PLAYTIKA HOLDING and DiamondRock Hospitality

0.7

Correlation Coefficient

PLAYTIKA HOLDING  DiamondRock Hospitality

Poor diversification

The 3 months correlation between PLAYTIKA and DiamondRock is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding PLAYTIKA HOLDING DL 01 and DiamondRock Hospitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DiamondRock Hospitality and PLAYTIKA HOLDING 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 PLAYTIKA HOLDING DL 01 are associated (or correlated) with DiamondRock Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DiamondRock Hospitality has no effect on the direction of PLAYTIKA HOLDING i.e., PLAYTIKA HOLDING and DiamondRock Hospitality go up and down completely randomly.

Pair Corralation between PLAYTIKA HOLDING and DiamondRock Hospitality

Assuming the 90 days horizon PLAYTIKA HOLDING is expected to generate 1.24 times less return on investment than DiamondRock Hospitality. But when comparing it to its historical volatility, PLAYTIKA HOLDING DL 01 is 2.35 times less risky than DiamondRock Hospitality. It trades about 0.15 of its potential returns per unit of risk. DiamondRock Hospitality is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  737.00  in DiamondRock Hospitality on September 5, 2024 and sell it today you would earn a total of  143.00  from holding DiamondRock Hospitality or generate 19.4% return on investment over 90 days.

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

PLAYTIKA HOLDING DL 01  vs.  DiamondRock Hospitality

PLAYTIKA HOLDING

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PLAYTIKA HOLDING DL 01 are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PLAYTIKA HOLDING reported solid returns over the last few months and may actually be approaching a breakup point.

DiamondRock Hospitality

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DiamondRock Hospitality are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DiamondRock Hospitality reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PLAYTIKA HOLDING and DiamondRock Hospitality

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

The idea behind PLAYTIKA HOLDING DL 01 and DiamondRock Hospitality 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.