Correlation Between Aristocrat Leisure and Playtech PLC

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

By analyzing existing cross correlation between Aristocrat Leisure Limited and Playtech PLC ADR, you can compare the effects of market volatilities on Aristocrat Leisure 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 Aristocrat Leisure with a short position of Playtech PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aristocrat Leisure and Playtech PLC.

Diversification Opportunities for Aristocrat Leisure and Playtech PLC

0.22

Correlation Coefficient

Aristocrat Leisure  Playtech PLC

Modest diversification

The 3 months correlation between Aristocrat and Playtech is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Aristocrat Leisure Limited and Playtech PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playtech PLC ADR and Aristocrat Leisure 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 Aristocrat Leisure Limited 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 ADR has no effect on the direction of Aristocrat Leisure i.e., Aristocrat Leisure and Playtech PLC go up and down completely randomly.

Pair Corralation between Aristocrat Leisure and Playtech PLC

Assuming the 90 days horizon Aristocrat Leisure is expected to generate 1.18 times less return on investment than Playtech PLC. In addition to that, Aristocrat Leisure is 4.51 times more volatile than Playtech PLC ADR. It trades about 0.03 of its total potential returns per unit of risk. Playtech PLC ADR is currently generating about 0.17 per unit of volatility. If you would invest  1,675  in Playtech PLC ADR on December 1, 2024 and sell it today you would earn a total of  125.00  from holding Playtech PLC ADR or generate 7.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	82.81%
Values	Daily Returns

Aristocrat Leisure Limited  vs.  Playtech PLC ADR

Aristocrat Leisure

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aristocrat Leisure Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Aristocrat Leisure is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Playtech PLC ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Playtech PLC ADR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, Playtech PLC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Aristocrat Leisure and Playtech PLC

The main advantage of trading using opposite Aristocrat Leisure and Playtech PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aristocrat Leisure 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 Aristocrat Leisure Limited and Playtech PLC ADR 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.