Correlation Between MHP Hotel and Playa Hotels

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

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

Diversification Opportunities for MHP Hotel and Playa Hotels

0.64

Correlation Coefficient

MHP Hotel  Playa Hotels

Poor diversification

The 3 months correlation between MHP and Playa is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding MHP Hotel AG 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 MHP Hotel 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 MHP Hotel AG 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 MHP Hotel i.e., MHP Hotel and Playa Hotels go up and down completely randomly.

Pair Corralation between MHP Hotel and Playa Hotels

Assuming the 90 days trading horizon MHP Hotel AG is expected to generate 2.34 times more return on investment than Playa Hotels. However, MHP Hotel is 2.34 times more volatile than Playa Hotels Resorts. It trades about 0.04 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  123.00  in MHP Hotel AG on December 30, 2024 and sell it today you would earn a total of  5.00  from holding MHP Hotel AG or generate 4.07% return on investment over 90 days.

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

MHP Hotel AG  vs.  Playa Hotels Resorts

MHP Hotel AG

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MHP Hotel AG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, MHP Hotel may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 MHP Hotel and Playa Hotels

The main advantage of trading using opposite MHP Hotel and Playa Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MHP Hotel 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 MHP Hotel AG 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.