Correlation Between Hooker Furniture and Playa Hotels
Can any of the company-specific risk be diversified away by investing in both Hooker Furniture 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 Hooker Furniture and Playa Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hooker Furniture and Playa Hotels Resorts, you can compare the effects of market volatilities on Hooker Furniture 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 Hooker Furniture with a short position of Playa Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hooker Furniture and Playa Hotels.
Diversification Opportunities for Hooker Furniture and Playa Hotels
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hooker and Playa is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Hooker Furniture 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 Hooker Furniture 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 Hooker Furniture 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 Hooker Furniture i.e., Hooker Furniture and Playa Hotels go up and down completely randomly.
Pair Corralation between Hooker Furniture and Playa Hotels
Given the investment horizon of 90 days Hooker Furniture is expected to generate 1.65 times more return on investment than Playa Hotels. However, Hooker Furniture is 1.65 times more volatile than Playa Hotels Resorts. It trades about 0.03 of its potential returns per unit of risk. Playa Hotels Resorts is currently generating about 0.02 per unit of risk. If you would invest 1,587 in Hooker Furniture on August 31, 2024 and sell it today you would earn a total of 286.00 from holding Hooker Furniture or generate 18.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hooker Furniture vs. Playa Hotels Resorts
Performance |
| Timeline |
| Hooker Furniture |
| Playa Hotels Resorts |
Hooker Furniture and Playa Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hooker Furniture and Playa Hotels
The main advantage of trading using opposite Hooker Furniture and Playa Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hooker Furniture 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.| Hooker Furniture vs. Bassett Furniture Industries | Hooker Furniture vs. Natuzzi SpA | Hooker Furniture vs. Flexsteel Industries | Hooker Furniture vs. Hamilton Beach Brands |
| Playa Hotels vs. Vail Resorts | Playa Hotels vs. Monarch Casino Resort | Playa Hotels vs. Hilton Grand Vacations | Playa Hotels vs. Full House Resorts |
Check out your portfolio center.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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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