Correlation Between Playa Hotels and AVITA Medical

Can any of the company-specific risk be diversified away by investing in both Playa Hotels and AVITA Medical 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 AVITA Medical 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 AVITA Medical, you can compare the effects of market volatilities on Playa Hotels and AVITA Medical 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 AVITA Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Playa Hotels and AVITA Medical.

Diversification Opportunities for Playa Hotels and AVITA Medical

-0.1

Correlation Coefficient

Playa Hotels  AVITA Medical

Good diversification

The 3 months correlation between Playa and AVITA is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and AVITA Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVITA Medical 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 AVITA Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVITA Medical has no effect on the direction of Playa Hotels i.e., Playa Hotels and AVITA Medical go up and down completely randomly.

Pair Corralation between Playa Hotels and AVITA Medical

Assuming the 90 days horizon Playa Hotels Resorts is expected to generate 0.5 times more return on investment than AVITA Medical. However, Playa Hotels Resorts is 2.01 times less risky than AVITA Medical. It trades about 0.06 of its potential returns per unit of risk. AVITA Medical is currently generating about 0.02 per unit of risk. If you would invest  705.00  in Playa Hotels Resorts on October 27, 2024 and sell it today you would earn a total of  475.00  from holding Playa Hotels Resorts or generate 67.38% return on investment over 90 days.

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

Playa Hotels Resorts  vs.  AVITA Medical

Playa Hotels Resorts

Risk-Adjusted Performance

12 of 100

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 nearly fragile basic indicators, Playa Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

AVITA Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AVITA Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, AVITA Medical 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 AVITA Medical

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

The idea behind Playa Hotels Resorts and AVITA Medical 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..