Correlation Between Playa Hotels and NOVARTIS

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

Diversification Opportunities for Playa Hotels and NOVARTIS

-0.46

Correlation Coefficient

Playa Hotels  NOVARTIS

Very good diversification

The 3 months correlation between Playa and NOVARTIS is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and NOVARTIS CAPITAL P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOVARTIS CAPITAL P 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 NOVARTIS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOVARTIS CAPITAL P has no effect on the direction of Playa Hotels i.e., Playa Hotels and NOVARTIS go up and down completely randomly.

Pair Corralation between Playa Hotels and NOVARTIS

Given the investment horizon of 90 days Playa Hotels Resorts is expected to generate 12.14 times more return on investment than NOVARTIS. However, Playa Hotels is 12.14 times more volatile than NOVARTIS CAPITAL P. It trades about 0.16 of its potential returns per unit of risk. NOVARTIS CAPITAL P is currently generating about -0.12 per unit of risk. If you would invest  872.00  in Playa Hotels Resorts on October 26, 2024 and sell it today you would earn a total of  352.00  from holding Playa Hotels Resorts or generate 40.37% return on investment over 90 days.

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

Playa Hotels Resorts  vs.  NOVARTIS CAPITAL P

Playa Hotels Resorts

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 12 (%) 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.

NOVARTIS CAPITAL P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NOVARTIS CAPITAL P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NOVARTIS is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Playa Hotels and NOVARTIS

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

The idea behind Playa Hotels Resorts and NOVARTIS CAPITAL P 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.