Correlation Between Playa Hotels and ON Semiconductor

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

Diversification Opportunities for Playa Hotels and ON Semiconductor

-0.66

Correlation Coefficient

Playa Hotels  ON Semiconductor

Excellent diversification

The 3 months correlation between Playa and ON Semiconductor is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and ON Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ON Semiconductor 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 ON Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ON Semiconductor has no effect on the direction of Playa Hotels i.e., Playa Hotels and ON Semiconductor go up and down completely randomly.

Pair Corralation between Playa Hotels and ON Semiconductor

Given the investment horizon of 90 days Playa Hotels Resorts is expected to generate 3.11 times more return on investment than ON Semiconductor. However, Playa Hotels is 3.11 times more volatile than ON Semiconductor. It trades about 0.18 of its potential returns per unit of risk. ON Semiconductor is currently generating about -0.16 per unit of risk. If you would invest  988.00  in Playa Hotels Resorts on October 10, 2024 and sell it today you would earn a total of  226.00  from holding Playa Hotels Resorts or generate 22.87% 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.  ON Semiconductor

Playa Hotels Resorts

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 14 (%) 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.

ON Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ON Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators 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 ON Semiconductor

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

The idea behind Playa Hotels Resorts and ON Semiconductor 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.