Correlation Between Playa Hotels and Playmates Toys

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Can any of the company-specific risk be diversified away by investing in both Playa Hotels and Playmates Toys 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 Playmates Toys 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 Playmates Toys Limited, you can compare the effects of market volatilities on Playa Hotels and Playmates Toys 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 Playmates Toys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Playa Hotels and Playmates Toys.

Diversification Opportunities for Playa Hotels and Playmates Toys

-0.34
  Correlation Coefficient

Very good diversification

The 3 months correlation between Playa and Playmates is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and Playmates Toys Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playmates Toys 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 Playmates Toys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playmates Toys has no effect on the direction of Playa Hotels i.e., Playa Hotels and Playmates Toys go up and down completely randomly.

Pair Corralation between Playa Hotels and Playmates Toys

Assuming the 90 days horizon Playa Hotels is expected to generate 5.95 times less return on investment than Playmates Toys. But when comparing it to its historical volatility, Playa Hotels Resorts is 7.37 times less risky than Playmates Toys. It trades about 0.04 of its potential returns per unit of risk. Playmates Toys Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  6.80  in Playmates Toys Limited on October 25, 2024 and sell it today you would lose (0.30) from holding Playmates Toys Limited or give up 4.41% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Playa Hotels Resorts  vs.  Playmates Toys Limited

 Performance 
       Timeline  
Playa Hotels Resorts 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 13 (%) 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.
Playmates Toys 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Playmates Toys Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Playmates Toys is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Playa Hotels and Playmates Toys Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Playa Hotels and Playmates Toys

The main advantage of trading using opposite Playa Hotels and Playmates Toys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Playa Hotels position performs unexpectedly, Playmates Toys 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 Playmates Toys will offset losses from the drop in Playmates Toys' long position.
The idea behind Playa Hotels Resorts and Playmates Toys Limited 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 Commodity Directory module to find actively traded commodities issued by global exchanges.

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