Correlation Between BC IRON and Playa Hotels

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

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

Diversification Opportunities for BC IRON and Playa Hotels

-0.4

Correlation Coefficient

BC IRON  Playa Hotels

Very good diversification

The 3 months correlation between BC3 and Playa is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding BC IRON 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 BC IRON 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 BC IRON 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 BC IRON i.e., BC IRON and Playa Hotels go up and down completely randomly.

Pair Corralation between BC IRON and Playa Hotels

Assuming the 90 days trading horizon BC IRON is expected to under-perform the Playa Hotels. In addition to that, BC IRON is 2.14 times more volatile than Playa Hotels Resorts. It trades about -0.32 of its total potential returns per unit of risk. Playa Hotels Resorts is currently generating about -0.08 per unit of volatility. If you would invest  1,240  in Playa Hotels Resorts on December 11, 2024 and sell it today you would lose (20.00) from holding Playa Hotels Resorts or give up 1.61% of portfolio value over 90 days.

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

BC IRON  vs.  Playa Hotels Resorts

BC IRON

Risk-Adjusted Performance

Very Weak

Over the last 90 days BC IRON has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 8 (%) 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 BC IRON and Playa Hotels

The main advantage of trading using opposite BC IRON and Playa Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BC IRON 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 BC IRON 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..