Correlation Between Playa Hotels and Chesapeake Utilities

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

Diversification Opportunities for Playa Hotels and Chesapeake Utilities

0.45

Correlation Coefficient

Playa Hotels  Chesapeake Utilities

Very weak diversification

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

Pair Corralation between Playa Hotels and Chesapeake Utilities

Assuming the 90 days horizon Playa Hotels Resorts is expected to generate 0.96 times more return on investment than Chesapeake Utilities. However, Playa Hotels Resorts is 1.04 times less risky than Chesapeake Utilities. It trades about 0.05 of its potential returns per unit of risk. Chesapeake Utilities is currently generating about 0.03 per unit of risk. If you would invest  1,160  in Playa Hotels Resorts on December 30, 2024 and sell it today you would earn a total of  40.00  from holding Playa Hotels Resorts or generate 3.45% return on investment over 90 days.

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

Playa Hotels Resorts  vs.  Chesapeake Utilities

Playa Hotels Resorts

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 3 (%) 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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Chesapeake Utilities

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chesapeake Utilities are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Chesapeake Utilities is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Playa Hotels and Chesapeake Utilities

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

The idea behind Playa Hotels Resorts and Chesapeake Utilities 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.