Correlation Between Playa Hotels and H M

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

Diversification Opportunities for Playa Hotels and H M

0.31

Correlation Coefficient

Playa Hotels  H M

Weak diversification

The 3 months correlation between Playa and HMSB is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and H M Hennes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H M Hennes 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 H M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H M Hennes has no effect on the direction of Playa Hotels i.e., Playa Hotels and H M go up and down completely randomly.

Pair Corralation between Playa Hotels and H M

Assuming the 90 days horizon Playa Hotels Resorts is expected to generate 1.29 times more return on investment than H M. However, Playa Hotels is 1.29 times more volatile than H M Hennes. It trades about 0.23 of its potential returns per unit of risk. H M Hennes is currently generating about 0.13 per unit of risk. If you would invest  780.00  in Playa Hotels Resorts on October 6, 2024 and sell it today you would earn a total of  420.00  from holding Playa Hotels Resorts or generate 53.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.5%
Values	Daily Returns

Playa Hotels Resorts  vs.  H M Hennes

Playa Hotels Resorts

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 17 (%) 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.

H M Hennes

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in H M Hennes are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental drivers, H M may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Playa Hotels and H M

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

The idea behind Playa Hotels Resorts and H M Hennes 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.