Correlation Between Playa Hotels and CHINA SOUTHN

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

Diversification Opportunities for Playa Hotels and CHINA SOUTHN

0.74

Correlation Coefficient

Playa Hotels  CHINA SOUTHN

Poor diversification

The 3 months correlation between Playa and CHINA is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and CHINA SOUTHN AIR H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA SOUTHN AIR 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 CHINA SOUTHN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA SOUTHN AIR has no effect on the direction of Playa Hotels i.e., Playa Hotels and CHINA SOUTHN go up and down completely randomly.

Pair Corralation between Playa Hotels and CHINA SOUTHN

Assuming the 90 days horizon Playa Hotels Resorts is expected to generate 2.87 times more return on investment than CHINA SOUTHN. However, Playa Hotels is 2.87 times more volatile than CHINA SOUTHN AIR H . It trades about 0.24 of its potential returns per unit of risk. CHINA SOUTHN AIR H is currently generating about -0.08 per unit of risk. If you would invest  935.00  in Playa Hotels Resorts on October 8, 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Playa Hotels Resorts  vs.  CHINA SOUTHN AIR H

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 fragile basic indicators, Playa Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

CHINA SOUTHN AIR

Risk-Adjusted Performance

13 of 100

Insignificant

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

Pair Trading with Playa Hotels and CHINA SOUTHN

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

The idea behind Playa Hotels Resorts and CHINA SOUTHN AIR H 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.