Correlation Between Playa Hotels and Tokyo Electron

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

Diversification Opportunities for Playa Hotels and Tokyo Electron

-0.63

Correlation Coefficient

Playa Hotels  Tokyo Electron

Excellent diversification

The 3 months correlation between Playa and Tokyo is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and Tokyo Electron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyo Electron 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 Tokyo Electron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyo Electron has no effect on the direction of Playa Hotels i.e., Playa Hotels and Tokyo Electron go up and down completely randomly.

Pair Corralation between Playa Hotels and Tokyo Electron

Given the investment horizon of 90 days Playa Hotels Resorts is expected to under-perform the Tokyo Electron. But the stock apears to be less risky and, when comparing its historical volatility, Playa Hotels Resorts is 2.12 times less risky than Tokyo Electron. The stock trades about -0.03 of its potential returns per unit of risk. The Tokyo Electron is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  14,880  in Tokyo Electron on September 23, 2024 and sell it today you would lose (55.00) from holding Tokyo Electron or give up 0.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Playa Hotels Resorts  vs.  Tokyo Electron

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.

Tokyo Electron

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tokyo Electron has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Playa Hotels and Tokyo Electron

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

The idea behind Playa Hotels Resorts and Tokyo Electron 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.