Correlation Between Playa Hotels and BANK CENTRAL

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

Diversification Opportunities for Playa Hotels and BANK CENTRAL

-0.5

Correlation Coefficient

Playa Hotels  BANK CENTRAL

Very good diversification

The 3 months correlation between Playa and BANK is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and BANK CENTRAL ASIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK CENTRAL ASIA 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 BANK CENTRAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK CENTRAL ASIA has no effect on the direction of Playa Hotels i.e., Playa Hotels and BANK CENTRAL go up and down completely randomly.

Pair Corralation between Playa Hotels and BANK CENTRAL

Assuming the 90 days horizon Playa Hotels Resorts is expected to generate 2.47 times more return on investment than BANK CENTRAL. However, Playa Hotels is 2.47 times more volatile than BANK CENTRAL ASIA. It trades about 0.17 of its potential returns per unit of risk. BANK CENTRAL ASIA is currently generating about -0.05 per unit of risk. If you would invest  915.00  in Playa Hotels Resorts on October 9, 2024 and sell it today you would earn a total of  285.00  from holding Playa Hotels Resorts or generate 31.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.37%
Values	Daily Returns

Playa Hotels Resorts  vs.  BANK CENTRAL ASIA

Playa Hotels Resorts

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Playa Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

BANK CENTRAL ASIA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BANK CENTRAL ASIA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Playa Hotels and BANK CENTRAL

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

The idea behind Playa Hotels Resorts and BANK CENTRAL ASIA 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.