Correlation Between Playa Hotels and Baldwin Insurance

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

Diversification Opportunities for Playa Hotels and Baldwin Insurance

-0.6

Correlation Coefficient

Playa Hotels  Baldwin Insurance

Excellent diversification

The 3 months correlation between Playa and Baldwin is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and The Baldwin Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baldwin Insurance 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 Baldwin Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baldwin Insurance has no effect on the direction of Playa Hotels i.e., Playa Hotels and Baldwin Insurance go up and down completely randomly.

Pair Corralation between Playa Hotels and Baldwin Insurance

Given the investment horizon of 90 days Playa Hotels Resorts is expected to generate 1.62 times more return on investment than Baldwin Insurance. However, Playa Hotels is 1.62 times more volatile than The Baldwin Insurance. It trades about 0.13 of its potential returns per unit of risk. The Baldwin Insurance is currently generating about -0.12 per unit of risk. If you would invest  1,020  in Playa Hotels Resorts on December 4, 2024 and sell it today you would earn a total of  314.50  from holding Playa Hotels Resorts or generate 30.83% return on investment over 90 days.

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

Playa Hotels Resorts  vs.  The Baldwin Insurance

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

Baldwin Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Baldwin Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Playa Hotels and Baldwin Insurance

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

The idea behind Playa Hotels Resorts and The Baldwin Insurance 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.