Correlation Between Playa Hotels and Kingspan Group

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

Diversification Opportunities for Playa Hotels and Kingspan Group

-0.29

Correlation Coefficient

Playa Hotels  Kingspan Group

Very good diversification

The 3 months correlation between Playa and Kingspan is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and Kingspan Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingspan Group plc 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 Kingspan Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingspan Group plc has no effect on the direction of Playa Hotels i.e., Playa Hotels and Kingspan Group go up and down completely randomly.

Pair Corralation between Playa Hotels and Kingspan Group

Assuming the 90 days horizon Playa Hotels Resorts is expected to generate 2.27 times more return on investment than Kingspan Group. However, Playa Hotels is 2.27 times more volatile than Kingspan Group plc. It trades about 0.14 of its potential returns per unit of risk. Kingspan Group plc is currently generating about 0.17 per unit of risk. If you would invest  905.00  in Playa Hotels Resorts on December 21, 2024 and sell it today you would earn a total of  305.00  from holding Playa Hotels Resorts or generate 33.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Playa Hotels Resorts  vs.  Kingspan Group plc

Playa Hotels Resorts

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 10 (%) 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.

Kingspan Group plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kingspan Group plc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Kingspan Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Playa Hotels and Kingspan Group

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

The idea behind Playa Hotels Resorts and Kingspan Group plc 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.