Correlation Between Link Real and Playa Hotels

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

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

Diversification Opportunities for Link Real and Playa Hotels

0.47

Correlation Coefficient

Link Real  Playa Hotels

Very weak diversification

The 3 months correlation between Link and Playa is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Link Real Estate 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 Link Real 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 Link Real Estate 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 Link Real i.e., Link Real and Playa Hotels go up and down completely randomly.

Pair Corralation between Link Real and Playa Hotels

Assuming the 90 days horizon Link Real Estate is expected to generate 2.52 times more return on investment than Playa Hotels. However, Link Real is 2.52 times more volatile than Playa Hotels Resorts. It trades about 0.14 of its potential returns per unit of risk. Playa Hotels Resorts is currently generating about 0.13 per unit of risk. If you would invest  410.00  in Link Real Estate on December 28, 2024 and sell it today you would earn a total of  76.00  from holding Link Real Estate or generate 18.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	91.67%
Values	Daily Returns

Link Real Estate  vs.  Playa Hotels Resorts

Link Real Estate

Risk-Adjusted Performance

OK

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

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 somewhat unfluctuating basic indicators, Playa Hotels may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Link Real and Playa Hotels

The main advantage of trading using opposite Link Real and Playa Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Link Real 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 Link Real Estate 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.