Correlation Between Playa Hotels and Apple

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

Diversification Opportunities for Playa Hotels and Apple

0.85

Correlation Coefficient

Playa Hotels  Apple

Very poor diversification

The 3 months correlation between Playa and Apple is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Playa Hotels Resorts and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of Playa Hotels i.e., Playa Hotels and Apple go up and down completely randomly.

Pair Corralation between Playa Hotels and Apple

Assuming the 90 days horizon Playa Hotels Resorts is expected to generate 1.7 times more return on investment than Apple. However, Playa Hotels is 1.7 times more volatile than Apple Inc. It trades about 0.24 of its potential returns per unit of risk. Apple Inc is currently generating about 0.23 per unit of risk. If you would invest  680.00  in Playa Hotels Resorts on September 16, 2024 and sell it today you would earn a total of  280.00  from holding Playa Hotels Resorts or generate 41.18% return on investment over 90 days.

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

Playa Hotels Resorts  vs.  Apple Inc

Playa Hotels Resorts

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 18 (%) 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.

Apple Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Apple exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Playa Hotels and Apple

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

The idea behind Playa Hotels Resorts and Apple 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.