Correlation Between Playa Hotels and Canlan Ice

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

Diversification Opportunities for Playa Hotels and Canlan Ice

0.7

Correlation Coefficient

Playa Hotels  Canlan Ice

Poor diversification

The 3 months correlation between Playa and Canlan is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and Canlan Ice Sports in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canlan Ice Sports 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 Canlan Ice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canlan Ice Sports has no effect on the direction of Playa Hotels i.e., Playa Hotels and Canlan Ice go up and down completely randomly.

Pair Corralation between Playa Hotels and Canlan Ice

Given the investment horizon of 90 days Playa Hotels Resorts is expected to generate 11.46 times more return on investment than Canlan Ice. However, Playa Hotels is 11.46 times more volatile than Canlan Ice Sports. It trades about 0.15 of its potential returns per unit of risk. Canlan Ice Sports is currently generating about 0.13 per unit of risk. If you would invest  1,226  in Playa Hotels Resorts on December 26, 2024 and sell it today you would earn a total of  108.00  from holding Playa Hotels Resorts or generate 8.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Playa Hotels Resorts  vs.  Canlan Ice Sports

Playa Hotels Resorts

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Playa Hotels may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Canlan Ice Sports

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canlan Ice Sports are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Canlan Ice is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Playa Hotels and Canlan Ice

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

The idea behind Playa Hotels Resorts and Canlan Ice Sports 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.