Correlation Between Alliance Data and Playtech Plc

Can any of the company-specific risk be diversified away by investing in both Alliance Data and Playtech Plc 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 Alliance Data and Playtech Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alliance Data Systems and Playtech Plc, you can compare the effects of market volatilities on Alliance Data and Playtech Plc 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 Alliance Data with a short position of Playtech Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Data and Playtech Plc.

Diversification Opportunities for Alliance Data and Playtech Plc

-0.01

Correlation Coefficient

Alliance Data  Playtech Plc

Good diversification

The 3 months correlation between Alliance and Playtech is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and Playtech Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playtech Plc and Alliance Data 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 Alliance Data Systems are associated (or correlated) with Playtech Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playtech Plc has no effect on the direction of Alliance Data i.e., Alliance Data and Playtech Plc go up and down completely randomly.

Pair Corralation between Alliance Data and Playtech Plc

Assuming the 90 days trading horizon Alliance Data Systems is expected to under-perform the Playtech Plc. In addition to that, Alliance Data is 2.0 times more volatile than Playtech Plc. It trades about -0.06 of its total potential returns per unit of risk. Playtech Plc is currently generating about 0.04 per unit of volatility. If you would invest  71,700  in Playtech Plc on December 2, 2024 and sell it today you would earn a total of  1,600  from holding Playtech Plc or generate 2.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.06%
Values	Daily Returns

Alliance Data Systems  vs.  Playtech Plc

Alliance Data Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alliance Data Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Playtech Plc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Playtech Plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Playtech Plc is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Alliance Data and Playtech Plc

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

The idea behind Alliance Data Systems and Playtech Plc 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.