Correlation Between Playa Hotels and Chegg

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

Diversification Opportunities for Playa Hotels and Chegg

0.35

Correlation Coefficient

Playa Hotels  Chegg

Weak diversification

The 3 months correlation between Playa and Chegg is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and Chegg Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chegg 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 Chegg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chegg Inc has no effect on the direction of Playa Hotels i.e., Playa Hotels and Chegg go up and down completely randomly.

Pair Corralation between Playa Hotels and Chegg

Assuming the 90 days horizon Playa Hotels Resorts is expected to generate 0.35 times more return on investment than Chegg. However, Playa Hotels Resorts is 2.86 times less risky than Chegg. It trades about 0.03 of its potential returns per unit of risk. Chegg Inc is currently generating about -0.08 per unit of risk. If you would invest  865.00  in Playa Hotels Resorts on September 3, 2024 and sell it today you would earn a total of  55.00  from holding Playa Hotels Resorts or generate 6.36% return on investment over 90 days.

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

Playa Hotels Resorts  vs.  Chegg Inc

Playa Hotels Resorts

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Playa Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

Chegg Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chegg Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Chegg reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Playa Hotels and Chegg

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

The idea behind Playa Hotels Resorts and Chegg 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.