Correlation Between Playa Hotels and CITIC

Can any of the company-specific risk be diversified away by investing in both Playa Hotels and CITIC 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 CITIC 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 CITIC LTD ADR5, you can compare the effects of market volatilities on Playa Hotels and CITIC 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 CITIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Playa Hotels and CITIC.

Diversification Opportunities for Playa Hotels and CITIC

-0.12

Correlation Coefficient

Playa Hotels  CITIC

Good diversification

The 3 months correlation between Playa and CITIC is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and CITIC LTD ADR5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC LTD ADR5 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 CITIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC LTD ADR5 has no effect on the direction of Playa Hotels i.e., Playa Hotels and CITIC go up and down completely randomly.

Pair Corralation between Playa Hotels and CITIC

Assuming the 90 days horizon Playa Hotels Resorts is expected to generate 3.94 times more return on investment than CITIC. However, Playa Hotels is 3.94 times more volatile than CITIC LTD ADR5. It trades about 0.23 of its potential returns per unit of risk. CITIC LTD ADR5 is currently generating about -0.08 per unit of risk. If you would invest  935.00  in Playa Hotels Resorts on October 10, 2024 and sell it today you would earn a total of  265.00  from holding Playa Hotels Resorts or generate 28.34% 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.  CITIC LTD ADR5

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.

CITIC LTD ADR5

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CITIC LTD ADR5 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, CITIC is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Playa Hotels and CITIC

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

The idea behind Playa Hotels Resorts and CITIC LTD ADR5 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.