Correlation Between Playa Hotels and CONSTELLATION

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

Diversification Opportunities for Playa Hotels and CONSTELLATION

-0.37

Correlation Coefficient

Playa Hotels  CONSTELLATION

Very good diversification

The 3 months correlation between Playa and CONSTELLATION is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and CONSTELLATION BRANDS INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONSTELLATION BRANDS INC 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 CONSTELLATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CONSTELLATION BRANDS INC has no effect on the direction of Playa Hotels i.e., Playa Hotels and CONSTELLATION go up and down completely randomly.

Pair Corralation between Playa Hotels and CONSTELLATION

Given the investment horizon of 90 days Playa Hotels Resorts is expected to generate 10.03 times more return on investment than CONSTELLATION. However, Playa Hotels is 10.03 times more volatile than CONSTELLATION BRANDS INC. It trades about 0.22 of its potential returns per unit of risk. CONSTELLATION BRANDS INC is currently generating about -0.02 per unit of risk. If you would invest  988.00  in Playa Hotels Resorts on October 8, 2024 and sell it today you would earn a total of  278.00  from holding Playa Hotels Resorts or generate 28.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Playa Hotels Resorts  vs.  CONSTELLATION BRANDS INC

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

CONSTELLATION BRANDS INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CONSTELLATION BRANDS INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CONSTELLATION is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Playa Hotels and CONSTELLATION

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

The idea behind Playa Hotels Resorts and CONSTELLATION BRANDS INC 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.