Correlation Between Playa Hotels and ARCA Oil

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

Diversification Opportunities for Playa Hotels and ARCA Oil

0.0

Correlation Coefficient

Playa Hotels  ARCA Oil

Pay attention - limited upside

The 3 months correlation between Playa and ARCA is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and ARCA Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARCA Oil 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 ARCA Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARCA Oil has no effect on the direction of Playa Hotels i.e., Playa Hotels and ARCA Oil go up and down completely randomly.

Pair Corralation between Playa Hotels and ARCA Oil

If you would invest  837.00  in Playa Hotels Resorts on October 2, 2024 and sell it today you would earn a total of  420.50  from holding Playa Hotels Resorts or generate 50.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.44%
Values	Daily Returns

Playa Hotels Resorts  vs.  ARCA Oil

Pair Trading with Playa Hotels and ARCA Oil

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

The idea behind Playa Hotels Resorts and ARCA Oil 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.