Correlation Between BORR DRILLING and Playa Hotels

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

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

Diversification Opportunities for BORR DRILLING and Playa Hotels

-0.56

Correlation Coefficient

BORR DRILLING  Playa Hotels

Excellent diversification

The 3 months correlation between BORR and Playa is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding BORR DRILLING NEW 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 BORR DRILLING 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 BORR DRILLING NEW 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 BORR DRILLING i.e., BORR DRILLING and Playa Hotels go up and down completely randomly.

Pair Corralation between BORR DRILLING and Playa Hotels

Assuming the 90 days horizon BORR DRILLING NEW is expected to under-perform the Playa Hotels. In addition to that, BORR DRILLING is 2.41 times more volatile than Playa Hotels Resorts. It trades about -0.52 of its total potential returns per unit of risk. Playa Hotels Resorts is currently generating about 0.23 per unit of volatility. If you would invest  1,220  in Playa Hotels Resorts on December 3, 2024 and sell it today you would earn a total of  60.00  from holding Playa Hotels Resorts or generate 4.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

BORR DRILLING NEW  vs.  Playa Hotels Resorts

BORR DRILLING NEW

Risk-Adjusted Performance

Very Weak

Over the last 90 days BORR DRILLING NEW has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Playa Hotels Resorts

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Playa Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BORR DRILLING and Playa Hotels

The main advantage of trading using opposite BORR DRILLING and Playa Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BORR DRILLING 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 BORR DRILLING NEW 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.