Correlation Between Vistra Energy and Playa Hotels

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

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

Diversification Opportunities for Vistra Energy and Playa Hotels

0.83

Correlation Coefficient

Vistra Energy  Playa Hotels

Very poor diversification

The 3 months correlation between Vistra and Playa is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Vistra Energy Corp 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 Vistra Energy 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 Vistra Energy Corp 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 Vistra Energy i.e., Vistra Energy and Playa Hotels go up and down completely randomly.

Pair Corralation between Vistra Energy and Playa Hotels

Considering the 90-day investment horizon Vistra Energy is expected to generate 18.53 times less return on investment than Playa Hotels. In addition to that, Vistra Energy is 3.17 times more volatile than Playa Hotels Resorts. It trades about 0.0 of its total potential returns per unit of risk. Playa Hotels Resorts is currently generating about 0.25 per unit of volatility. If you would invest  950.00  in Playa Hotels Resorts on September 17, 2024 and sell it today you would earn a total of  62.00  from holding Playa Hotels Resorts or generate 6.53% return on investment over 90 days.

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

Vistra Energy Corp  vs.  Playa Hotels Resorts

Vistra Energy Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vistra Energy Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Vistra Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Playa Hotels Resorts

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 19 (%) 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 Vistra Energy and Playa Hotels

The main advantage of trading using opposite Vistra Energy and Playa Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vistra Energy 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 Vistra Energy Corp 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.