Correlation Between Ultra Clean and Playa Hotels

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

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

Diversification Opportunities for Ultra Clean and Playa Hotels

0.72

Correlation Coefficient

Ultra Clean  Playa Hotels

Poor diversification

The 3 months correlation between Ultra and Playa is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Clean Holdings 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 Ultra Clean 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 Ultra Clean Holdings 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 Ultra Clean i.e., Ultra Clean and Playa Hotels go up and down completely randomly.

Pair Corralation between Ultra Clean and Playa Hotels

Assuming the 90 days horizon Ultra Clean Holdings is expected to generate 1.28 times more return on investment than Playa Hotels. However, Ultra Clean is 1.28 times more volatile than Playa Hotels Resorts. It trades about 0.1 of its potential returns per unit of risk. Playa Hotels Resorts is currently generating about 0.04 per unit of risk. If you would invest  3,480  in Ultra Clean Holdings on October 26, 2024 and sell it today you would earn a total of  120.00  from holding Ultra Clean Holdings or generate 3.45% return on investment over 90 days.

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

Ultra Clean Holdings  vs.  Playa Hotels Resorts

Ultra Clean Holdings

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Clean Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Ultra Clean is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Playa Hotels Resorts

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Playa Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ultra Clean and Playa Hotels

The main advantage of trading using opposite Ultra Clean and Playa Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultra Clean 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 Ultra Clean Holdings 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 Commodity Directory module to find actively traded commodities issued by global exchanges.