Correlation Between LENSAR and Playa Hotels
Can any of the company-specific risk be diversified away by investing in both LENSAR 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 LENSAR and Playa Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LENSAR Inc and Playa Hotels Resorts, you can compare the effects of market volatilities on LENSAR 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 LENSAR with a short position of Playa Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of LENSAR and Playa Hotels.
Diversification Opportunities for LENSAR and Playa Hotels
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between LENSAR and Playa is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding LENSAR Inc 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 LENSAR 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 LENSAR Inc 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 LENSAR i.e., LENSAR and Playa Hotels go up and down completely randomly.
Pair Corralation between LENSAR and Playa Hotels
Given the investment horizon of 90 days LENSAR Inc is expected to generate 2.76 times more return on investment than Playa Hotels. However, LENSAR is 2.76 times more volatile than Playa Hotels Resorts. It trades about 0.16 of its potential returns per unit of risk. Playa Hotels Resorts is currently generating about 0.25 per unit of risk. If you would invest 502.00 in LENSAR Inc on September 12, 2024 and sell it today you would earn a total of 255.00 from holding LENSAR Inc or generate 50.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
LENSAR Inc vs. Playa Hotels Resorts
Performance |
| Timeline |
| LENSAR Inc |
| Playa Hotels Resorts |
LENSAR and Playa Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LENSAR and Playa Hotels
The main advantage of trading using opposite LENSAR and Playa Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LENSAR 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 LENSAR Inc 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.| Playa Hotels vs. Golden Entertainment | Playa Hotels vs. Red Rock Resorts | Playa Hotels vs. Century Casinos | Playa Hotels vs. Studio City International |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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