Correlation Between Full House and Playa Hotels

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

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

Diversification Opportunities for Full House and Playa Hotels

0.36

Correlation Coefficient

Full House  Playa Hotels

Weak diversification

The 3 months correlation between Full and Playa is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Full House Resorts 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 Full House 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 Full House Resorts 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 Full House i.e., Full House and Playa Hotels go up and down completely randomly.

Pair Corralation between Full House and Playa Hotels

Considering the 90-day investment horizon Full House Resorts is expected to under-perform the Playa Hotels. In addition to that, Full House is 1.58 times more volatile than Playa Hotels Resorts. It trades about -0.02 of its total potential returns per unit of risk. Playa Hotels Resorts is currently generating about 0.05 per unit of volatility. If you would invest  923.00  in Playa Hotels Resorts on November 20, 2024 and sell it today you would earn a total of  412.00  from holding Playa Hotels Resorts or generate 44.64% return on investment over 90 days.

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

Full House Resorts  vs.  Playa Hotels Resorts

Full House Resorts

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Full House Resorts are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent essential indicators, Full House disclosed solid returns over the last few months and may actually be approaching a breakup point.

Playa Hotels Resorts

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Playa Hotels sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Full House and Playa Hotels

The main advantage of trading using opposite Full House and Playa Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Full House 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 Full House Resorts 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.