Correlation Between Playa Hotels and Choice Hotels
Can any of the company-specific risk be diversified away by investing in both Playa Hotels and Choice 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 Playa Hotels and Choice Hotels 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 Choice Hotels International, you can compare the effects of market volatilities on Playa Hotels and Choice 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 Playa Hotels with a short position of Choice Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Playa Hotels and Choice Hotels.
Diversification Opportunities for Playa Hotels and Choice Hotels
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Playa and Choice is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and Choice Hotels International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choice Hotels Intern 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 Choice Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choice Hotels Intern has no effect on the direction of Playa Hotels i.e., Playa Hotels and Choice Hotels go up and down completely randomly.
Pair Corralation between Playa Hotels and Choice Hotels
Assuming the 90 days horizon Playa Hotels Resorts is expected to under-perform the Choice Hotels. But the stock apears to be less risky and, when comparing its historical volatility, Playa Hotels Resorts is 1.14 times less risky than Choice Hotels. The stock trades about -0.06 of its potential returns per unit of risk. The Choice Hotels International is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 13,500 in Choice Hotels International on November 2, 2024 and sell it today you would earn a total of 500.00 from holding Choice Hotels International or generate 3.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Playa Hotels Resorts vs. Choice Hotels International
Performance |
| Timeline |
| Playa Hotels Resorts |
| Choice Hotels Intern |
Playa Hotels and Choice Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Playa Hotels and Choice Hotels
The main advantage of trading using opposite Playa Hotels and Choice Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Playa Hotels position performs unexpectedly, Choice 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 Choice Hotels will offset losses from the drop in Choice Hotels' long position.| Playa Hotels vs. Major Drilling Group | Playa Hotels vs. AWILCO DRILLING PLC | Playa Hotels vs. PRECISION DRILLING P | Playa Hotels vs. Carnegie Clean Energy |
| Choice Hotels vs. PULSION Medical Systems | Choice Hotels vs. Merit Medical Systems | Choice Hotels vs. Live Nation Entertainment | Choice Hotels vs. Compugroup Medical SE |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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