Correlation Between Playa Hotels and Alibaba Health
Can any of the company-specific risk be diversified away by investing in both Playa Hotels and Alibaba Health 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 Alibaba Health 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 Alibaba Health Information, you can compare the effects of market volatilities on Playa Hotels and Alibaba Health 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 Alibaba Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Playa Hotels and Alibaba Health.
Diversification Opportunities for Playa Hotels and Alibaba Health
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Playa and Alibaba is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and Alibaba Health Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alibaba Health Infor 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 Alibaba Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alibaba Health Infor has no effect on the direction of Playa Hotels i.e., Playa Hotels and Alibaba Health go up and down completely randomly.
Pair Corralation between Playa Hotels and Alibaba Health
Assuming the 90 days horizon Playa Hotels Resorts is expected to generate 0.96 times more return on investment than Alibaba Health. However, Playa Hotels Resorts is 1.04 times less risky than Alibaba Health. It trades about 0.27 of its potential returns per unit of risk. Alibaba Health Information is currently generating about -0.05 per unit of risk. If you would invest 785.00 in Playa Hotels Resorts on September 5, 2024 and sell it today you would earn a total of 145.00 from holding Playa Hotels Resorts or generate 18.47% 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. Alibaba Health Information
Performance |
| Timeline |
| Playa Hotels Resorts |
| Alibaba Health Infor |
Playa Hotels and Alibaba Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Playa Hotels and Alibaba Health
The main advantage of trading using opposite Playa Hotels and Alibaba Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Playa Hotels position performs unexpectedly, Alibaba Health 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 Alibaba Health will offset losses from the drop in Alibaba Health's long position.The idea behind Playa Hotels Resorts and Alibaba Health Information 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.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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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