Correlation Between Zoom Video and Playa Hotels

Can any of the company-specific risk be diversified away by investing in both Zoom Video and Playa Hotels 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 Zoom Video and Playa Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zoom Video Communications and Playa Hotels Resorts, you can compare the effects of market volatilities on Zoom Video and Playa Hotels 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 Zoom Video with a short position of Playa Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zoom Video and Playa Hotels.

Diversification Opportunities for Zoom Video and Playa Hotels

0.95

Correlation Coefficient

Zoom Video  Playa Hotels

Almost no diversification

The 3 months correlation between Zoom and Playa is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Zoom Video Communications and Playa Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playa Hotels Resorts and Zoom Video 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 Zoom Video Communications are associated (or correlated) with Playa Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playa Hotels Resorts has no effect on the direction of Zoom Video i.e., Zoom Video and Playa Hotels go up and down completely randomly.

Pair Corralation between Zoom Video and Playa Hotels

Allowing for the 90-day total investment horizon Zoom Video is expected to generate 1.61 times less return on investment than Playa Hotels. In addition to that, Zoom Video is 1.21 times more volatile than Playa Hotels Resorts. It trades about 0.03 of its total potential returns per unit of risk. Playa Hotels Resorts is currently generating about 0.06 per unit of volatility. If you would invest  637.00  in Playa Hotels Resorts on September 19, 2024 and sell it today you would earn a total of  324.00  from holding Playa Hotels Resorts or generate 50.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Zoom Video Communications  vs.  Playa Hotels Resorts

Zoom Video Communications

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zoom Video Communications are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal primary indicators, Zoom Video displayed solid returns over the last few months and may actually be approaching a breakup point.

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

Pair Trading with Zoom Video and Playa Hotels

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

The idea behind Zoom Video Communications and Playa Hotels Resorts 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.