Correlation Between Playa Hotels and Atrium Ljungberg

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

Diversification Opportunities for Playa Hotels and Atrium Ljungberg

-0.53

Correlation Coefficient

Playa Hotels  Atrium Ljungberg

Excellent diversification

The 3 months correlation between Playa and Atrium is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and Atrium Ljungberg AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atrium Ljungberg 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 Atrium Ljungberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atrium Ljungberg has no effect on the direction of Playa Hotels i.e., Playa Hotels and Atrium Ljungberg go up and down completely randomly.

Pair Corralation between Playa Hotels and Atrium Ljungberg

Assuming the 90 days horizon Playa Hotels Resorts is expected to generate 3.12 times more return on investment than Atrium Ljungberg. However, Playa Hotels is 3.12 times more volatile than Atrium Ljungberg AB. It trades about 0.17 of its potential returns per unit of risk. Atrium Ljungberg AB is currently generating about -0.07 per unit of risk. If you would invest  915.00  in Playa Hotels Resorts on October 9, 2024 and sell it today you would earn a total of  285.00  from holding Playa Hotels Resorts or generate 31.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.37%
Values	Daily Returns

Playa Hotels Resorts  vs.  Atrium Ljungberg AB

Playa Hotels Resorts

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Playa Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

Atrium Ljungberg

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Atrium Ljungberg AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Playa Hotels and Atrium Ljungberg

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

The idea behind Playa Hotels Resorts and Atrium Ljungberg AB 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.