Correlation Between Pekin Life and Playa Hotels

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

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

Diversification Opportunities for Pekin Life and Playa Hotels

0.72

Correlation Coefficient

Pekin Life  Playa Hotels

Poor diversification

The 3 months correlation between Pekin and Playa is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Pekin Life Insurance 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 Pekin Life 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 Pekin Life Insurance 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 Pekin Life i.e., Pekin Life and Playa Hotels go up and down completely randomly.

Pair Corralation between Pekin Life and Playa Hotels

Given the investment horizon of 90 days Pekin Life Insurance is not expected to generate positive returns. However, Pekin Life Insurance is 240.26 times less risky than Playa Hotels. It waists most of its returns potential to compensate for thr risk taken. Playa Hotels is generating about 0.18 per unit of risk. If you would invest  1,021  in Playa Hotels Resorts on October 12, 2024 and sell it today you would earn a total of  226.00  from holding Playa Hotels Resorts or generate 22.14% return on investment over 90 days.

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

Pekin Life Insurance  vs.  Playa Hotels Resorts

Pekin Life Insurance

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pekin Life Insurance are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Pekin Life is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Playa Hotels Resorts

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 14 (%) 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 Pekin Life and Playa Hotels

The main advantage of trading using opposite Pekin Life and Playa Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pekin Life 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 Pekin Life Insurance 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 Commodity Directory module to find actively traded commodities issued by global exchanges.