Correlation Between Playa Hotels and Vail Resorts

Can any of the company-specific risk be diversified away by investing in both Playa Hotels and Vail Resorts 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 Vail Resorts 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 Vail Resorts, you can compare the effects of market volatilities on Playa Hotels and Vail Resorts 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 Vail Resorts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Playa Hotels and Vail Resorts.

Diversification Opportunities for Playa Hotels and Vail Resorts

0.52

Correlation Coefficient

Playa Hotels  Vail Resorts

Very weak diversification

The 3 months correlation between Playa and Vail is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and Vail Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vail Resorts 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 Vail Resorts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vail Resorts has no effect on the direction of Playa Hotels i.e., Playa Hotels and Vail Resorts go up and down completely randomly.

Pair Corralation between Playa Hotels and Vail Resorts

Given the investment horizon of 90 days Playa Hotels Resorts is expected to generate 0.75 times more return on investment than Vail Resorts. However, Playa Hotels Resorts is 1.34 times less risky than Vail Resorts. It trades about -0.1 of its potential returns per unit of risk. Vail Resorts is currently generating about -0.18 per unit of risk. If you would invest  912.00  in Playa Hotels Resorts on February 23, 2024 and sell it today you would lose (74.00) from holding Playa Hotels Resorts or give up 8.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Playa Hotels Resorts  vs.  Vail Resorts

Playa Hotels Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Playa Hotels Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Vail Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vail Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Playa Hotels and Vail Resorts

The main advantage of trading using opposite Playa Hotels and Vail Resorts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Playa Hotels position performs unexpectedly, Vail Resorts 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 Vail Resorts will offset losses from the drop in Vail Resorts' long position.

The idea behind Playa Hotels Resorts and Vail 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.

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.