Correlation Between GMO Internet and Playa Hotels
Can any of the company-specific risk be diversified away by investing in both GMO Internet 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 GMO Internet and Playa Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMO Internet and Playa Hotels Resorts, you can compare the effects of market volatilities on GMO Internet 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 GMO Internet with a short position of Playa Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMO Internet and Playa Hotels.
Diversification Opportunities for GMO Internet and Playa Hotels
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GMO and Playa is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding GMO Internet 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 GMO Internet 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 GMO Internet 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 GMO Internet i.e., GMO Internet and Playa Hotels go up and down completely randomly.
Pair Corralation between GMO Internet and Playa Hotels
Assuming the 90 days horizon GMO Internet is expected to generate 1.05 times more return on investment than Playa Hotels. However, GMO Internet is 1.05 times more volatile than Playa Hotels Resorts. It trades about 0.21 of its potential returns per unit of risk. Playa Hotels Resorts is currently generating about 0.11 per unit of risk. If you would invest 1,600 in GMO Internet on November 9, 2024 and sell it today you would earn a total of 110.00 from holding GMO Internet or generate 6.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GMO Internet vs. Playa Hotels Resorts
Performance |
| Timeline |
| GMO Internet |
| Playa Hotels Resorts |
GMO Internet and Playa Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMO Internet and Playa Hotels
The main advantage of trading using opposite GMO Internet and Playa Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMO Internet 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.| GMO Internet vs. Fevertree Drinks PLC | GMO Internet vs. TYSON FOODS A | GMO Internet vs. THAI BEVERAGE | GMO Internet vs. VULCAN MATERIALS |
| Playa Hotels vs. Beta Systems Software | Playa Hotels vs. Vishay Intertechnology | Playa Hotels vs. Kingdee International Software | Playa Hotels vs. Casio Computer CoLtd |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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