Correlation Between Playa Hotels and Major Drilling
Can any of the company-specific risk be diversified away by investing in both Playa Hotels and Major Drilling 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 Playa Hotels and Major Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Playa Hotels Resorts and Major Drilling Group, you can compare the effects of market volatilities on Playa Hotels and Major Drilling 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 Playa Hotels with a short position of Major Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Playa Hotels and Major Drilling.
Diversification Opportunities for Playa Hotels and Major Drilling
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Playa and Major is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and Major Drilling Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Major Drilling Group and Playa 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 Playa Hotels Resorts are associated (or correlated) with Major Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Major Drilling Group has no effect on the direction of Playa Hotels i.e., Playa Hotels and Major Drilling go up and down completely randomly.
Pair Corralation between Playa Hotels and Major Drilling
Assuming the 90 days horizon Playa Hotels Resorts is expected to generate 0.87 times more return on investment than Major Drilling. However, Playa Hotels Resorts is 1.15 times less risky than Major Drilling. It trades about 0.06 of its potential returns per unit of risk. Major Drilling Group is currently generating about -0.01 per unit of risk. If you would invest 580.00 in Playa Hotels Resorts on September 4, 2024 and sell it today you would earn a total of 340.00 from holding Playa Hotels Resorts or generate 58.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Playa Hotels Resorts vs. Major Drilling Group
Performance |
| Timeline |
| Playa Hotels Resorts |
| Major Drilling Group |
Playa Hotels and Major Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Playa Hotels and Major Drilling
The main advantage of trading using opposite Playa Hotels and Major Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Playa Hotels position performs unexpectedly, Major Drilling 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 Major Drilling will offset losses from the drop in Major Drilling's long position.The idea behind Playa Hotels Resorts and Major Drilling Group 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.| Major Drilling vs. Direct Line Insurance | Major Drilling vs. National Health Investors | Major Drilling vs. REVO INSURANCE SPA | Major Drilling vs. SBI Insurance Group |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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