Correlation Between Cedar Realty and Playtech Plc

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

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

Diversification Opportunities for Cedar Realty and Playtech Plc

-0.36

Correlation Coefficient

Cedar Realty  Playtech Plc

Very good diversification

The 3 months correlation between Cedar and Playtech is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Cedar Realty Trust and Playtech plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playtech plc and Cedar Realty 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 Cedar Realty Trust 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 Cedar Realty i.e., Cedar Realty and Playtech Plc go up and down completely randomly.

Pair Corralation between Cedar Realty and Playtech Plc

Assuming the 90 days trading horizon Cedar Realty Trust is expected to generate 2.02 times more return on investment than Playtech Plc. However, Cedar Realty is 2.02 times more volatile than Playtech plc. It trades about 0.09 of its potential returns per unit of risk. Playtech plc is currently generating about -0.04 per unit of risk. If you would invest  1,524  in Cedar Realty Trust on December 23, 2024 and sell it today you would earn a total of  217.00  from holding Cedar Realty Trust or generate 14.24% return on investment over 90 days.

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

Cedar Realty Trust  vs.  Playtech plc

Cedar Realty Trust

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cedar Realty Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Cedar Realty sustained solid returns over the last few months and may actually be approaching a breakup point.

Playtech plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Playtech plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Playtech Plc is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cedar Realty and Playtech Plc

The main advantage of trading using opposite Cedar Realty and Playtech Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cedar Realty 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 Cedar Realty Trust 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.