Correlation Between Playa Hotels and Empresa Distribuidora

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

Diversification Opportunities for Playa Hotels and Empresa Distribuidora

0.64

Correlation Coefficient

Playa Hotels  Empresa Distribuidora

Poor diversification

The 3 months correlation between Playa and Empresa is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and Empresa Distribuidora y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empresa Distribuidora 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 Empresa Distribuidora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empresa Distribuidora has no effect on the direction of Playa Hotels i.e., Playa Hotels and Empresa Distribuidora go up and down completely randomly.

Pair Corralation between Playa Hotels and Empresa Distribuidora

Given the investment horizon of 90 days Playa Hotels is expected to generate 1.13 times less return on investment than Empresa Distribuidora. In addition to that, Playa Hotels is 1.06 times more volatile than Empresa Distribuidora y. It trades about 0.18 of its total potential returns per unit of risk. Empresa Distribuidora y is currently generating about 0.22 per unit of volatility. If you would invest  2,335  in Empresa Distribuidora y on October 11, 2024 and sell it today you would earn a total of  1,410  from holding Empresa Distribuidora y or generate 60.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Playa Hotels Resorts  vs.  Empresa Distribuidora y

Playa Hotels Resorts

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 14 (%) 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.

Empresa Distribuidora

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Empresa Distribuidora y are ranked lower than 17 (%) 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.

Pair Trading with Playa Hotels and Empresa Distribuidora

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

The idea behind Playa Hotels Resorts and Empresa Distribuidora y 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.