Correlation Between Playa Hotels and GEAR4MUSIC (HLDGS)

Can any of the company-specific risk be diversified away by investing in both Playa Hotels and GEAR4MUSIC (HLDGS) 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 GEAR4MUSIC (HLDGS) 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 GEAR4MUSIC LS 10, you can compare the effects of market volatilities on Playa Hotels and GEAR4MUSIC (HLDGS) 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 GEAR4MUSIC (HLDGS). Check out your portfolio center. Please also check ongoing floating volatility patterns of Playa Hotels and GEAR4MUSIC (HLDGS).

Diversification Opportunities for Playa Hotels and GEAR4MUSIC (HLDGS)

-0.08

Correlation Coefficient

Playa Hotels  GEAR4MUSIC (HLDGS)

Good diversification

The 3 months correlation between Playa and GEAR4MUSIC is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and GEAR4MUSIC LS 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEAR4MUSIC (HLDGS) 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 GEAR4MUSIC (HLDGS). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEAR4MUSIC (HLDGS) has no effect on the direction of Playa Hotels i.e., Playa Hotels and GEAR4MUSIC (HLDGS) go up and down completely randomly.

Pair Corralation between Playa Hotels and GEAR4MUSIC (HLDGS)

Assuming the 90 days horizon Playa Hotels Resorts is expected to generate 1.96 times more return on investment than GEAR4MUSIC (HLDGS). However, Playa Hotels is 1.96 times more volatile than GEAR4MUSIC LS 10. It trades about 0.21 of its potential returns per unit of risk. GEAR4MUSIC LS 10 is currently generating about 0.03 per unit of risk. If you would invest  740.00  in Playa Hotels Resorts on October 10, 2024 and sell it today you would earn a total of  470.00  from holding Playa Hotels Resorts or generate 63.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Playa Hotels Resorts  vs.  GEAR4MUSIC LS 10

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 fragile basic indicators, Playa Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

GEAR4MUSIC (HLDGS)

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GEAR4MUSIC LS 10 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, GEAR4MUSIC (HLDGS) is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Playa Hotels and GEAR4MUSIC (HLDGS)

The main advantage of trading using opposite Playa Hotels and GEAR4MUSIC (HLDGS) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Playa Hotels position performs unexpectedly, GEAR4MUSIC (HLDGS) 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 GEAR4MUSIC (HLDGS) will offset losses from the drop in GEAR4MUSIC (HLDGS)'s long position.

The idea behind Playa Hotels Resorts and GEAR4MUSIC LS 10 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.