Correlation Between Playa Hotels and Insteel Industries
Can any of the company-specific risk be diversified away by investing in both Playa Hotels and Insteel Industries 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 Insteel Industries 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 Insteel Industries, you can compare the effects of market volatilities on Playa Hotels and Insteel Industries 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 Insteel Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Playa Hotels and Insteel Industries.
Diversification Opportunities for Playa Hotels and Insteel Industries
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Playa and Insteel is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and Insteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insteel Industries 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 Insteel Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insteel Industries has no effect on the direction of Playa Hotels i.e., Playa Hotels and Insteel Industries go up and down completely randomly.
Pair Corralation between Playa Hotels and Insteel Industries
Assuming the 90 days horizon Playa Hotels Resorts is expected to generate 1.05 times more return on investment than Insteel Industries. However, Playa Hotels is 1.05 times more volatile than Insteel Industries. It trades about 0.04 of its potential returns per unit of risk. Insteel Industries is currently generating about 0.03 per unit of risk. If you would invest 845.00 in Playa Hotels Resorts on October 29, 2024 and sell it today you would earn a total of 315.00 from holding Playa Hotels Resorts or generate 37.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Playa Hotels Resorts vs. Insteel Industries
Performance |
| Timeline |
| Playa Hotels Resorts |
| Insteel Industries |
Playa Hotels and Insteel Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Playa Hotels and Insteel Industries
The main advantage of trading using opposite Playa Hotels and Insteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Playa Hotels position performs unexpectedly, Insteel Industries 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 Insteel Industries will offset losses from the drop in Insteel Industries' long position.| Playa Hotels vs. Chunghwa Telecom Co | Playa Hotels vs. Highlight Communications AG | Playa Hotels vs. betterU Education Corp | Playa Hotels vs. G8 EDUCATION |
| Insteel Industries vs. Apollo Medical Holdings | Insteel Industries vs. LG Electronics | Insteel Industries vs. TT Electronics PLC | Insteel Industries vs. STMICROELECTRONICS |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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