Correlation Between Empresa Distribuidora and Playa Hotels

Can any of the company-specific risk be diversified away by investing in both Empresa Distribuidora 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 Empresa Distribuidora and Playa Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Empresa Distribuidora y and Playa Hotels Resorts, you can compare the effects of market volatilities on Empresa Distribuidora 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 Empresa Distribuidora with a short position of Playa Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empresa Distribuidora and Playa Hotels.

Diversification Opportunities for Empresa Distribuidora and Playa Hotels

0.5

Correlation Coefficient

Empresa Distribuidora  Playa Hotels

Very weak diversification

The 3 months correlation between Empresa and Playa is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Empresa Distribuidora y 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 Empresa Distribuidora 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 Empresa Distribuidora y 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 Empresa Distribuidora i.e., Empresa Distribuidora and Playa Hotels go up and down completely randomly.

Pair Corralation between Empresa Distribuidora and Playa Hotels

Considering the 90-day investment horizon Empresa Distribuidora y is expected to generate 1.17 times more return on investment than Playa Hotels. However, Empresa Distribuidora is 1.17 times more volatile than Playa Hotels Resorts. It trades about 0.2 of its potential returns per unit of risk. Playa Hotels Resorts is currently generating about 0.11 per unit of risk. If you would invest  1,626  in Empresa Distribuidora y on October 26, 2024 and sell it today you would earn a total of  2,028  from holding Empresa Distribuidora y or generate 124.72% return on investment over 90 days.

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

Empresa Distribuidora y  vs.  Playa Hotels Resorts

Empresa Distribuidora

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Empresa Distribuidora y are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Empresa Distribuidora displayed solid returns over the last few months and may actually be approaching a breakup point.

Playa Hotels Resorts

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Playa Hotels sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Empresa Distribuidora and Playa Hotels

The main advantage of trading using opposite Empresa Distribuidora and Playa Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empresa Distribuidora 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 Empresa Distribuidora y 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.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.