Correlation Between Playa Hotels and Sun Hung

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

Diversification Opportunities for Playa Hotels and Sun Hung

0.49

Correlation Coefficient

Playa Hotels  Sun Hung

Very weak diversification

The 3 months correlation between Playa and Sun is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and Sun Hung Kai in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Hung Kai 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 Sun Hung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Hung Kai has no effect on the direction of Playa Hotels i.e., Playa Hotels and Sun Hung go up and down completely randomly.

Pair Corralation between Playa Hotels and Sun Hung

Given the investment horizon of 90 days Playa Hotels Resorts is expected to generate 0.93 times more return on investment than Sun Hung. However, Playa Hotels Resorts is 1.08 times less risky than Sun Hung. It trades about -0.3 of its potential returns per unit of risk. Sun Hung Kai is currently generating about -0.29 per unit of risk. If you would invest  965.00  in Playa Hotels Resorts on January 20, 2024 and sell it today you would lose (66.00) from holding Playa Hotels Resorts or give up 6.84% 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.  Sun Hung Kai

Playa Hotels Resorts

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Playa Hotels may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Sun Hung Kai

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sun Hung Kai has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking indicators, Sun Hung is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Playa Hotels and Sun Hung

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

The idea behind Playa Hotels Resorts and Sun Hung Kai 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.