Correlation Between Playa Hotels and ALGOMA STEEL
Can any of the company-specific risk be diversified away by investing in both Playa Hotels and ALGOMA STEEL 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 ALGOMA STEEL 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 ALGOMA STEEL GROUP, you can compare the effects of market volatilities on Playa Hotels and ALGOMA STEEL 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 ALGOMA STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Playa Hotels and ALGOMA STEEL.
Diversification Opportunities for Playa Hotels and ALGOMA STEEL
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Playa and ALGOMA is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and ALGOMA STEEL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALGOMA STEEL 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 ALGOMA STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALGOMA STEEL GROUP has no effect on the direction of Playa Hotels i.e., Playa Hotels and ALGOMA STEEL go up and down completely randomly.
Pair Corralation between Playa Hotels and ALGOMA STEEL
Assuming the 90 days horizon Playa Hotels is expected to generate 1.34 times less return on investment than ALGOMA STEEL. But when comparing it to its historical volatility, Playa Hotels Resorts is 1.26 times less risky than ALGOMA STEEL. It trades about 0.06 of its potential returns per unit of risk. ALGOMA STEEL GROUP is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 521.00 in ALGOMA STEEL GROUP on September 5, 2024 and sell it today you would earn a total of 469.00 from holding ALGOMA STEEL GROUP or generate 90.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Playa Hotels Resorts vs. ALGOMA STEEL GROUP
Performance |
| Timeline |
| Playa Hotels Resorts |
| ALGOMA STEEL GROUP |
Playa Hotels and ALGOMA STEEL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Playa Hotels and ALGOMA STEEL
The main advantage of trading using opposite Playa Hotels and ALGOMA STEEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Playa Hotels position performs unexpectedly, ALGOMA STEEL 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 ALGOMA STEEL will offset losses from the drop in ALGOMA STEEL's long position.The idea behind Playa Hotels Resorts and ALGOMA STEEL 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.| ALGOMA STEEL vs. Playa Hotels Resorts | ALGOMA STEEL vs. Tyson Foods | ALGOMA STEEL vs. Wyndham Hotels Resorts | ALGOMA STEEL vs. InterContinental Hotels 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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