Correlation Between Lion Biotechnologies and Playtech Plc

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

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

Diversification Opportunities for Lion Biotechnologies and Playtech Plc

-0.32

Correlation Coefficient

Lion Biotechnologies  Playtech Plc

Very good diversification

The 3 months correlation between Lion and Playtech is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Lion Biotechnologies and Playtech plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playtech plc and Lion Biotechnologies 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 Lion Biotechnologies 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 Lion Biotechnologies i.e., Lion Biotechnologies and Playtech Plc go up and down completely randomly.

Pair Corralation between Lion Biotechnologies and Playtech Plc

Assuming the 90 days trading horizon Lion Biotechnologies is expected to generate 5.74 times less return on investment than Playtech Plc. In addition to that, Lion Biotechnologies is 2.93 times more volatile than Playtech plc. It trades about 0.01 of its total potential returns per unit of risk. Playtech plc is currently generating about 0.2 per unit of volatility. If you would invest  540.00  in Playtech plc on September 23, 2024 and sell it today you would earn a total of  314.00  from holding Playtech plc or generate 58.15% return on investment over 90 days.

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

Lion Biotechnologies  vs.  Playtech plc

Lion Biotechnologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lion Biotechnologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Playtech plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Playtech plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Playtech Plc is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Lion Biotechnologies and Playtech Plc

The main advantage of trading using opposite Lion Biotechnologies and Playtech Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lion Biotechnologies 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 Lion Biotechnologies 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.