Correlation Between Playa Hotels and Direct Line
Can any of the company-specific risk be diversified away by investing in both Playa Hotels and Direct Line 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 Direct Line 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 Direct Line Insurance, you can compare the effects of market volatilities on Playa Hotels and Direct Line 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 Direct Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of Playa Hotels and Direct Line.
Diversification Opportunities for Playa Hotels and Direct Line
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Playa and Direct is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and Direct Line Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direct Line 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 Direct Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direct Line Insurance has no effect on the direction of Playa Hotels i.e., Playa Hotels and Direct Line go up and down completely randomly.
Pair Corralation between Playa Hotels and Direct Line
Given the investment horizon of 90 days Playa Hotels Resorts is expected to under-perform the Direct Line. But the stock apears to be less risky and, when comparing its historical volatility, Playa Hotels Resorts is 4.37 times less risky than Direct Line. The stock trades about -0.09 of its potential returns per unit of risk. The Direct Line Insurance is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 794.00 in Direct Line Insurance on September 24, 2024 and sell it today you would earn a total of 418.00 from holding Direct Line Insurance or generate 52.64% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Playa Hotels Resorts vs. Direct Line Insurance
Performance |
Timeline |
Playa Hotels Resorts |
Direct Line Insurance |
Playa Hotels and Direct Line Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Playa Hotels and Direct Line
The main advantage of trading using opposite Playa Hotels and Direct Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Playa Hotels position performs unexpectedly, Direct Line 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 Direct Line will offset losses from the drop in Direct Line's long position.Playa Hotels vs. Biglari Holdings | Playa Hotels vs. Smart Share Global | Playa Hotels vs. Sweetgreen | Playa Hotels vs. WW International |
Direct Line vs. Mill City Ventures | Direct Line vs. FTAI Aviation Ltd | Direct Line vs. Encore Capital Group | Direct Line vs. AmTrust Financial Services |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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