Correlation Between Capital Metals and Playtech Plc

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

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

Diversification Opportunities for Capital Metals and Playtech Plc

-0.07

Correlation Coefficient

Capital Metals  Playtech Plc

Good diversification

The 3 months correlation between Capital and Playtech is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Capital Metals PLC and Playtech Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playtech Plc and Capital Metals 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 Capital Metals PLC 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 Capital Metals i.e., Capital Metals and Playtech Plc go up and down completely randomly.

Pair Corralation between Capital Metals and Playtech Plc

Assuming the 90 days trading horizon Capital Metals PLC is expected to generate 3.3 times more return on investment than Playtech Plc. However, Capital Metals is 3.3 times more volatile than Playtech Plc. It trades about 0.21 of its potential returns per unit of risk. Playtech Plc is currently generating about 0.02 per unit of risk. If you would invest  170.00  in Capital Metals PLC on December 30, 2024 and sell it today you would earn a total of  105.00  from holding Capital Metals PLC or generate 61.76% return on investment over 90 days.

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

Capital Metals PLC  vs.  Playtech Plc

Capital Metals PLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Metals PLC are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Capital Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Playtech Plc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Playtech Plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 Capital Metals and Playtech Plc

The main advantage of trading using opposite Capital Metals and Playtech Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Metals 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 Capital Metals PLC 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.