Correlation Between Playa Hotels and NORTHEAST UTILITIES
Can any of the company-specific risk be diversified away by investing in both Playa Hotels and NORTHEAST UTILITIES 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 NORTHEAST UTILITIES 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 NORTHEAST UTILITIES, you can compare the effects of market volatilities on Playa Hotels and NORTHEAST UTILITIES 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 NORTHEAST UTILITIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Playa Hotels and NORTHEAST UTILITIES.
Diversification Opportunities for Playa Hotels and NORTHEAST UTILITIES
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Playa and NORTHEAST is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and NORTHEAST UTILITIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORTHEAST UTILITIES 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 NORTHEAST UTILITIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORTHEAST UTILITIES has no effect on the direction of Playa Hotels i.e., Playa Hotels and NORTHEAST UTILITIES go up and down completely randomly.
Pair Corralation between Playa Hotels and NORTHEAST UTILITIES
Assuming the 90 days horizon Playa Hotels Resorts is expected to generate 1.34 times more return on investment than NORTHEAST UTILITIES. However, Playa Hotels is 1.34 times more volatile than NORTHEAST UTILITIES. It trades about 0.05 of its potential returns per unit of risk. NORTHEAST UTILITIES is currently generating about -0.02 per unit of risk. If you would invest 630.00 in Playa Hotels Resorts on September 3, 2024 and sell it today you would earn a total of 290.00 from holding Playa Hotels Resorts or generate 46.03% 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. NORTHEAST UTILITIES
Performance |
| Timeline |
| Playa Hotels Resorts |
| NORTHEAST UTILITIES |
Playa Hotels and NORTHEAST UTILITIES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Playa Hotels and NORTHEAST UTILITIES
The main advantage of trading using opposite Playa Hotels and NORTHEAST UTILITIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Playa Hotels position performs unexpectedly, NORTHEAST UTILITIES 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 NORTHEAST UTILITIES will offset losses from the drop in NORTHEAST UTILITIES's long position.| Playa Hotels vs. SBA Communications Corp | Playa Hotels vs. Datadog | Playa Hotels vs. Consolidated Communications Holdings | Playa Hotels vs. Ribbon Communications |
| NORTHEAST UTILITIES vs. TOTAL GABON | NORTHEAST UTILITIES vs. Walgreens Boots Alliance | NORTHEAST UTILITIES vs. Peak Resources Limited |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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