Correlation Between Stepan and Playa Hotels
Can any of the company-specific risk be diversified away by investing in both Stepan and Playa 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 Stepan and Playa Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepan Company and Playa Hotels Resorts, you can compare the effects of market volatilities on Stepan and Playa 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 Stepan with a short position of Playa Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepan and Playa Hotels.
Diversification Opportunities for Stepan and Playa Hotels
-0.91 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Stepan and Playa is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and Playa Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playa Hotels Resorts and Stepan 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 Stepan Company are associated (or correlated) with Playa Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playa Hotels Resorts has no effect on the direction of Stepan i.e., Stepan and Playa Hotels go up and down completely randomly.
Pair Corralation between Stepan and Playa Hotels
Considering the 90-day investment horizon Stepan is expected to generate 21.38 times less return on investment than Playa Hotels. In addition to that, Stepan is 1.61 times more volatile than Playa Hotels Resorts. It trades about 0.01 of its total potential returns per unit of risk. Playa Hotels Resorts is currently generating about 0.24 per unit of volatility. If you would invest 1,214 in Playa Hotels Resorts on November 8, 2024 and sell it today you would earn a total of 74.00 from holding Playa Hotels Resorts or generate 6.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepan Company vs. Playa Hotels Resorts
Performance |
| Timeline |
| Stepan Company |
| Playa Hotels Resorts |
Stepan and Playa Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepan and Playa Hotels
The main advantage of trading using opposite Stepan and Playa Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, Playa 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 Playa Hotels will offset losses from the drop in Playa Hotels' long position.The idea behind Stepan Company and Playa Hotels Resorts 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.| Playa Hotels vs. Yatra Online | Playa Hotels vs. Despegar Corp | Playa Hotels vs. MakeMyTrip Limited | Playa Hotels vs. Tuniu Corp |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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