Correlation Between INSURANCE AUST and Playa Hotels

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

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

Diversification Opportunities for INSURANCE AUST and Playa Hotels

-0.19

Correlation Coefficient

INSURANCE AUST  Playa Hotels

Good diversification

The 3 months correlation between INSURANCE and Playa is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding INSURANCE AUST GRP 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 INSURANCE AUST 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 INSURANCE AUST GRP 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 INSURANCE AUST i.e., INSURANCE AUST and Playa Hotels go up and down completely randomly.

Pair Corralation between INSURANCE AUST and Playa Hotels

Assuming the 90 days trading horizon INSURANCE AUST GRP is expected to under-perform the Playa Hotels. In addition to that, INSURANCE AUST is 1.66 times more volatile than Playa Hotels Resorts. It trades about -0.06 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  1,160  in Playa Hotels Resorts on December 30, 2024 and sell it today you would earn a total of  40.00  from holding Playa Hotels Resorts or generate 3.45% return on investment over 90 days.

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

INSURANCE AUST GRP  vs.  Playa Hotels Resorts

INSURANCE AUST GRP

Risk-Adjusted Performance

Very Weak

Over the last 90 days INSURANCE AUST GRP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 INSURANCE AUST and Playa Hotels

The main advantage of trading using opposite INSURANCE AUST and Playa Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INSURANCE AUST 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 INSURANCE AUST GRP 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.