Correlation Between Playa Hotels and VIRGIN WINES

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

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

Diversification Opportunities for Playa Hotels and VIRGIN WINES

0.0

Correlation Coefficient

Playa Hotels  VIRGIN WINES

Pay attention - limited upside

The 3 months correlation between Playa and VIRGIN is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and VIRGIN WINES UK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VIRGIN WINES UK and Playa Hotels 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 Playa Hotels Resorts are associated (or correlated) with VIRGIN WINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VIRGIN WINES UK has no effect on the direction of Playa Hotels i.e., Playa Hotels and VIRGIN WINES go up and down completely randomly.

Pair Corralation between Playa Hotels and VIRGIN WINES

If you would invest  1,170  in Playa Hotels Resorts on October 26, 2024 and sell it today you would earn a total of  10.00  from holding Playa Hotels Resorts or generate 0.85% return on investment over 90 days.

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

Playa Hotels Resorts  vs.  VIRGIN WINES UK

Playa Hotels Resorts

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Playa Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

VIRGIN WINES UK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VIRGIN WINES UK has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, VIRGIN WINES is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Playa Hotels and VIRGIN WINES

The main advantage of trading using opposite Playa Hotels and VIRGIN WINES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Playa Hotels position performs unexpectedly, VIRGIN WINES 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 VIRGIN WINES will offset losses from the drop in VIRGIN WINES's long position.

The idea behind Playa Hotels Resorts and VIRGIN WINES UK 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 Transaction History module to view history of all your transactions and understand their impact on performance.