Correlation Between Playa Hotels and Fenbo Holdings

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

Diversification Opportunities for Playa Hotels and Fenbo Holdings

-0.67

Correlation Coefficient

Playa Hotels  Fenbo Holdings

Excellent diversification

The 3 months correlation between Playa and Fenbo is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and Fenbo Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fenbo Holdings 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 Fenbo Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fenbo Holdings has no effect on the direction of Playa Hotels i.e., Playa Hotels and Fenbo Holdings go up and down completely randomly.

Pair Corralation between Playa Hotels and Fenbo Holdings

Given the investment horizon of 90 days Playa Hotels is expected to generate 4.35 times less return on investment than Fenbo Holdings. But when comparing it to its historical volatility, Playa Hotels Resorts is 6.39 times less risky than Fenbo Holdings. It trades about 0.07 of its potential returns per unit of risk. Fenbo Holdings Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  145.00  in Fenbo Holdings Limited on October 25, 2024 and sell it today you would earn a total of  2.00  from holding Fenbo Holdings Limited or generate 1.38% 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.  Fenbo Holdings Limited

Playa Hotels Resorts

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 13 (%) 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.

Fenbo Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Playa Hotels and Fenbo Holdings

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

The idea behind Playa Hotels Resorts and Fenbo Holdings Limited 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.