Correlation Between Playa Hotels and PT Bank

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

Diversification Opportunities for Playa Hotels and PT Bank

-0.45

Correlation Coefficient

Playa Hotels  PT Bank

Very good diversification

The 3 months correlation between Playa and BOZA is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and PT Bank Maybank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Maybank 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 PT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bank Maybank has no effect on the direction of Playa Hotels i.e., Playa Hotels and PT Bank go up and down completely randomly.

Pair Corralation between Playa Hotels and PT Bank

Assuming the 90 days horizon Playa Hotels Resorts is expected to generate 0.35 times more return on investment than PT Bank. However, Playa Hotels Resorts is 2.88 times less risky than PT Bank. It trades about 0.07 of its potential returns per unit of risk. PT Bank Maybank is currently generating about -0.02 per unit of risk. If you would invest  1,160  in Playa Hotels Resorts on December 28, 2024 and sell it today you would earn a total of  60.00  from holding Playa Hotels Resorts or generate 5.17% return on investment over 90 days.

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

Playa Hotels Resorts  vs.  PT Bank Maybank

Playa Hotels Resorts

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 5 (%) 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

PT Bank Maybank

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Bank Maybank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PT Bank 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 PT Bank

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

The idea behind Playa Hotels Resorts and PT Bank Maybank 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.