Correlation Between TT Electronics and Flutter Entertainment

Can any of the company-specific risk be diversified away by investing in both TT Electronics and Flutter Entertainment 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 TT Electronics and Flutter Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TT Electronics PLC and Flutter Entertainment PLC, you can compare the effects of market volatilities on TT Electronics and Flutter Entertainment 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 TT Electronics with a short position of Flutter Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of TT Electronics and Flutter Entertainment.

Diversification Opportunities for TT Electronics and Flutter Entertainment

0.63

Correlation Coefficient

TT Electronics  Flutter Entertainment

Poor diversification

The 3 months correlation between 7TT and Flutter is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding TT Electronics PLC and Flutter Entertainment PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flutter Entertainment PLC and TT Electronics 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 TT Electronics PLC are associated (or correlated) with Flutter Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flutter Entertainment PLC has no effect on the direction of TT Electronics i.e., TT Electronics and Flutter Entertainment go up and down completely randomly.

Pair Corralation between TT Electronics and Flutter Entertainment

Assuming the 90 days trading horizon TT Electronics is expected to generate 2.69 times less return on investment than Flutter Entertainment. In addition to that, TT Electronics is 1.99 times more volatile than Flutter Entertainment PLC. It trades about 0.03 of its total potential returns per unit of risk. Flutter Entertainment PLC is currently generating about 0.17 per unit of volatility. If you would invest  20,610  in Flutter Entertainment PLC on October 26, 2024 and sell it today you would earn a total of  4,830  from holding Flutter Entertainment PLC or generate 23.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

TT Electronics PLC  vs.  Flutter Entertainment PLC

TT Electronics PLC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TT Electronics PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, TT Electronics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Flutter Entertainment PLC

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Flutter Entertainment PLC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Flutter Entertainment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TT Electronics and Flutter Entertainment

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

The idea behind TT Electronics PLC and Flutter Entertainment 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.

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.