Correlation Between British American and Playa Hotels
Can any of the company-specific risk be diversified away by investing in both British American 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 British American and Playa Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and Playa Hotels Resorts, you can compare the effects of market volatilities on British American 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 British American with a short position of Playa Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Playa Hotels.
Diversification Opportunities for British American and Playa Hotels
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between British and Playa is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco 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 British American 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 British American Tobacco 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 British American i.e., British American and Playa Hotels go up and down completely randomly.
Pair Corralation between British American and Playa Hotels
Assuming the 90 days trading horizon British American Tobacco is expected to under-perform the Playa Hotels. In addition to that, British American is 1.49 times more volatile than Playa Hotels Resorts. It trades about -0.04 of its total potential returns per unit of risk. Playa Hotels Resorts is currently generating about 0.29 per unit of volatility. If you would invest 1,150 in Playa Hotels Resorts on November 28, 2024 and sell it today you would earn a total of 110.00 from holding Playa Hotels Resorts or generate 9.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. Playa Hotels Resorts
Performance |
| Timeline |
| British American Tobacco |
| Playa Hotels Resorts |
British American and Playa Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Playa Hotels
The main advantage of trading using opposite British American and Playa Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American 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.| British American vs. CVR Medical Corp | British American vs. Ebro Foods SA | British American vs. Carnegie Clean Energy | British American vs. ULTRA CLEAN HLDGS |
| Playa Hotels vs. JAPAN AIRLINES | Playa Hotels vs. Nomad Foods | Playa Hotels vs. US Foods Holding | Playa Hotels vs. SOUTHWEST AIRLINES |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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