Correlation Between CANADA RARE and Playa Hotels

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Can any of the company-specific risk be diversified away by investing in both CANADA RARE 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 CANADA RARE and Playa Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CANADA RARE EARTH and Playa Hotels Resorts, you can compare the effects of market volatilities on CANADA RARE 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 CANADA RARE with a short position of Playa Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of CANADA RARE and Playa Hotels.

Diversification Opportunities for CANADA RARE and Playa Hotels

0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between CANADA and Playa is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding CANADA RARE EARTH 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 CANADA RARE 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 CANADA RARE EARTH 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 CANADA RARE i.e., CANADA RARE and Playa Hotels go up and down completely randomly.

Pair Corralation between CANADA RARE and Playa Hotels

Assuming the 90 days trading horizon CANADA RARE EARTH is expected to under-perform the Playa Hotels. But the stock apears to be less risky and, when comparing its historical volatility, CANADA RARE EARTH is 1.48 times less risky than Playa Hotels. The stock trades about -0.21 of its potential returns per unit of risk. The Playa Hotels Resorts is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,210  in Playa Hotels Resorts on November 3, 2024 and sell it today you would lose (20.00) from holding Playa Hotels Resorts or give up 1.65% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.65%
ValuesDaily Returns

CANADA RARE EARTH  vs.  Playa Hotels Resorts

 Performance 
       Timeline  
CANADA RARE EARTH 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in CANADA RARE EARTH are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, CANADA RARE exhibited solid returns over the last few months and may actually be approaching a breakup point.
Playa Hotels Resorts 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 14 (%) 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.

CANADA RARE and Playa Hotels Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CANADA RARE and Playa Hotels

The main advantage of trading using opposite CANADA RARE and Playa Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CANADA RARE 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 CANADA RARE EARTH 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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