Correlation Between Zumiez and Playa Hotels

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

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

Diversification Opportunities for Zumiez and Playa Hotels

-0.73

Correlation Coefficient

Zumiez  Playa Hotels

Pay attention - limited upside

The 3 months correlation between Zumiez and Playa is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Zumiez Inc 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 Zumiez 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 Zumiez Inc 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 Zumiez i.e., Zumiez and Playa Hotels go up and down completely randomly.

Pair Corralation between Zumiez and Playa Hotels

Given the investment horizon of 90 days Zumiez Inc is expected to under-perform the Playa Hotels. In addition to that, Zumiez is 2.87 times more volatile than Playa Hotels Resorts. It trades about -0.2 of its total potential returns per unit of risk. Playa Hotels Resorts is currently generating about 0.04 per unit of volatility. If you would invest  1,225  in Playa Hotels Resorts on October 25, 2024 and sell it today you would earn a total of  11.00  from holding Playa Hotels Resorts or generate 0.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Zumiez Inc  vs.  Playa Hotels Resorts

Zumiez Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zumiez Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Playa Hotels Resorts

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 12 (%) 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 Zumiez and Playa Hotels

The main advantage of trading using opposite Zumiez and Playa Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zumiez 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 Zumiez Inc 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.