Correlation Between AM EAGLE and Playa Hotels

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

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

Diversification Opportunities for AM EAGLE and Playa Hotels

-0.39

Correlation Coefficient

AM EAGLE  Playa Hotels

Very good diversification

The 3 months correlation between AFG and Playa is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding AM EAGLE OUTFITTERS 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 AM EAGLE 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 AM EAGLE OUTFITTERS 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 AM EAGLE i.e., AM EAGLE and Playa Hotels go up and down completely randomly.

Pair Corralation between AM EAGLE and Playa Hotels

Assuming the 90 days trading horizon AM EAGLE OUTFITTERS is expected to generate 2.74 times more return on investment than Playa Hotels. However, AM EAGLE is 2.74 times more volatile than Playa Hotels Resorts. It trades about 0.02 of its potential returns per unit of risk. Playa Hotels Resorts is currently generating about -0.03 per unit of risk. If you would invest  1,700  in AM EAGLE OUTFITTERS on September 12, 2024 and sell it today you would earn a total of  0.00  from holding AM EAGLE OUTFITTERS or generate 0.0% return on investment over 90 days.

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

AM EAGLE OUTFITTERS  vs.  Playa Hotels Resorts

AM EAGLE OUTFITTERS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AM EAGLE OUTFITTERS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, AM EAGLE is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with AM EAGLE and Playa Hotels

The main advantage of trading using opposite AM EAGLE and Playa Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AM EAGLE 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 AM EAGLE OUTFITTERS 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.