Correlation Between Auto Trader and Playtech Plc

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

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

Diversification Opportunities for Auto Trader and Playtech Plc

0.54

Correlation Coefficient

Auto Trader  Playtech Plc

Very weak diversification

The 3 months correlation between Auto and Playtech is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and Playtech Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playtech Plc and Auto Trader 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 Auto Trader Group 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 Auto Trader i.e., Auto Trader and Playtech Plc go up and down completely randomly.

Pair Corralation between Auto Trader and Playtech Plc

Assuming the 90 days trading horizon Auto Trader Group is expected to under-perform the Playtech Plc. But the stock apears to be less risky and, when comparing its historical volatility, Auto Trader Group is 1.45 times less risky than Playtech Plc. The stock trades about -0.41 of its potential returns per unit of risk. The Playtech Plc is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  73,100  in Playtech Plc on October 9, 2024 and sell it today you would lose (1,900) from holding Playtech Plc or give up 2.6% of portfolio value over 90 days.

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

Auto Trader Group  vs.  Playtech Plc

Auto Trader Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Auto Trader Group 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

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Auto Trader and Playtech Plc

The main advantage of trading using opposite Auto Trader and Playtech Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader 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 Auto Trader Group 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.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..