Correlation Between Transportadora and Playa Hotels

Can any of the company-specific risk be diversified away by investing in both Transportadora and Playa Hotels 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 Transportadora and Playa Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Transportadora de Gas and Playa Hotels Resorts, you can compare the effects of market volatilities on Transportadora and Playa Hotels 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 Transportadora with a short position of Playa Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transportadora and Playa Hotels.

Diversification Opportunities for Transportadora and Playa Hotels

0.9

Correlation Coefficient

Transportadora  Playa Hotels

Almost no diversification

The 3 months correlation between Transportadora and Playa is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Transportadora de Gas and Playa Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playa Hotels Resorts and Transportadora 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 Transportadora de Gas are associated (or correlated) with Playa Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playa Hotels Resorts has no effect on the direction of Transportadora i.e., Transportadora and Playa Hotels go up and down completely randomly.

Pair Corralation between Transportadora and Playa Hotels

Considering the 90-day investment horizon Transportadora de Gas is expected to generate 1.52 times more return on investment than Playa Hotels. However, Transportadora is 1.52 times more volatile than Playa Hotels Resorts. It trades about 0.23 of its potential returns per unit of risk. Playa Hotels Resorts is currently generating about 0.26 per unit of risk. If you would invest  2,083  in Transportadora de Gas on September 17, 2024 and sell it today you would earn a total of  949.00  from holding Transportadora de Gas or generate 45.56% return on investment over 90 days.

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

Transportadora de Gas  vs.  Playa Hotels Resorts

Transportadora de Gas

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Transportadora de Gas are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Transportadora unveiled solid returns over the last few months and may actually be approaching a breakup point.

Playa Hotels Resorts

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 20 (%) 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.

Pair Trading with Transportadora and Playa Hotels

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

The idea behind Transportadora de Gas and Playa Hotels Resorts 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.