Correlation Between Playa Hotels and Penn National

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

Diversification Opportunities for Playa Hotels and Penn National

0.2

Correlation Coefficient

Playa Hotels  Penn National

Modest diversification

The 3 months correlation between Playa and Penn is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and Penn National Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penn National Gaming 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 Penn National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penn National Gaming has no effect on the direction of Playa Hotels i.e., Playa Hotels and Penn National go up and down completely randomly.

Pair Corralation between Playa Hotels and Penn National

Given the investment horizon of 90 days Playa Hotels Resorts is expected to generate 0.67 times more return on investment than Penn National. However, Playa Hotels Resorts is 1.49 times less risky than Penn National. It trades about 0.07 of its potential returns per unit of risk. Penn National Gaming is currently generating about -0.02 per unit of risk. If you would invest  686.00  in Playa Hotels Resorts on October 3, 2024 and sell it today you would earn a total of  579.00  from holding Playa Hotels Resorts or generate 84.4% 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.  Penn National Gaming

Playa Hotels Resorts

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Playa Hotels sustained solid returns over the last few months and may actually be approaching a breakup point.

Penn National Gaming

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Penn National Gaming are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Penn National may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Playa Hotels and Penn National

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

The idea behind Playa Hotels Resorts and Penn National Gaming 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.