Correlation Between Choice Hotels and Playa Hotels
Can any of the company-specific risk be diversified away by investing in both Choice Hotels 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 Choice Hotels and Playa Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Choice Hotels International and Playa Hotels Resorts, you can compare the effects of market volatilities on Choice Hotels 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 Choice Hotels with a short position of Playa Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Choice Hotels and Playa Hotels.
Diversification Opportunities for Choice Hotels and Playa Hotels
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Choice and Playa is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International 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 Choice 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 Choice Hotels International 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 Choice Hotels i.e., Choice Hotels and Playa Hotels go up and down completely randomly.
Pair Corralation between Choice Hotels and Playa Hotels
Assuming the 90 days horizon Choice Hotels is expected to generate 1.33 times less return on investment than Playa Hotels. But when comparing it to its historical volatility, Choice Hotels International is 2.11 times less risky than Playa Hotels. It trades about 0.29 of its potential returns per unit of risk. Playa Hotels Resorts is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 810.00 in Playa Hotels Resorts on August 31, 2024 and sell it today you would earn a total of 105.00 from holding Playa Hotels Resorts or generate 12.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Choice Hotels International vs. Playa Hotels Resorts
Performance |
| Timeline |
| Choice Hotels Intern |
| Playa Hotels Resorts |
Choice Hotels and Playa Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Choice Hotels and Playa Hotels
The main advantage of trading using opposite Choice Hotels and Playa Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels 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.| Choice Hotels vs. Hilton Worldwide Holdings | Choice Hotels vs. InterContinental Hotels Group | Choice Hotels vs. ACCOR SPADR NEW |
| Playa Hotels vs. Superior Plus Corp | Playa Hotels vs. NMI Holdings | Playa Hotels vs. Origin Agritech | Playa Hotels vs. SIVERS SEMICONDUCTORS AB |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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