Correlation Between Playa Hotels and Principal Financial
Can any of the company-specific risk be diversified away by investing in both Playa Hotels and Principal Financial 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 Principal Financial 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 Principal Financial Group, you can compare the effects of market volatilities on Playa Hotels and Principal Financial 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 Principal Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Playa Hotels and Principal Financial.
Diversification Opportunities for Playa Hotels and Principal Financial
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Playa and Principal is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and Principal Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Financial 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 Principal Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Financial has no effect on the direction of Playa Hotels i.e., Playa Hotels and Principal Financial go up and down completely randomly.
Pair Corralation between Playa Hotels and Principal Financial
Assuming the 90 days horizon Playa Hotels Resorts is expected to generate 1.46 times more return on investment than Principal Financial. However, Playa Hotels is 1.46 times more volatile than Principal Financial Group. It trades about 0.25 of its potential returns per unit of risk. Principal Financial Group is currently generating about 0.17 per unit of risk. If you would invest 775.00 in Playa Hotels Resorts on September 1, 2024 and sell it today you would earn a total of 135.00 from holding Playa Hotels Resorts or generate 17.42% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 95.65% |
Values | Daily Returns |
Playa Hotels Resorts vs. Principal Financial Group
Performance |
Timeline |
Playa Hotels Resorts |
Principal Financial |
Playa Hotels and Principal Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Playa Hotels and Principal Financial
The main advantage of trading using opposite Playa Hotels and Principal Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Playa Hotels position performs unexpectedly, Principal Financial 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 Principal Financial will offset losses from the drop in Principal Financial's long position.Playa Hotels vs. JJ SNACK FOODS | Playa Hotels vs. Suntory Beverage Food | Playa Hotels vs. Treasury Wine Estates | Playa Hotels vs. MOLSON RS BEVERAGE |
Principal Financial vs. MYFAIR GOLD P | Principal Financial vs. Strategic Education | Principal Financial vs. EEDUCATION ALBERT AB | Principal Financial vs. G8 EDUCATION |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
Content Syndication Quickly integrate customizable finance content to your own investment portal | |
ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas |