Correlation Between Flutter Entertainment and Edinburgh Investment

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

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

Diversification Opportunities for Flutter Entertainment and Edinburgh Investment

0.66

Correlation Coefficient

Flutter Entertainment  Edinburgh Investment

Poor diversification

The 3 months correlation between Flutter and Edinburgh is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Flutter Entertainment PLC and Edinburgh Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edinburgh Investment and Flutter Entertainment 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 Flutter Entertainment PLC are associated (or correlated) with Edinburgh Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edinburgh Investment has no effect on the direction of Flutter Entertainment i.e., Flutter Entertainment and Edinburgh Investment go up and down completely randomly.

Pair Corralation between Flutter Entertainment and Edinburgh Investment

Assuming the 90 days trading horizon Flutter Entertainment PLC is expected to under-perform the Edinburgh Investment. In addition to that, Flutter Entertainment is 2.15 times more volatile than Edinburgh Investment Trust. It trades about -0.11 of its total potential returns per unit of risk. Edinburgh Investment Trust is currently generating about -0.15 per unit of volatility. If you would invest  75,900  in Edinburgh Investment Trust on October 9, 2024 and sell it today you would lose (1,300) from holding Edinburgh Investment Trust or give up 1.71% of portfolio value over 90 days.

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

Flutter Entertainment PLC  vs.  Edinburgh Investment Trust

Flutter Entertainment PLC

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Flutter Entertainment PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Flutter Entertainment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Edinburgh Investment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Edinburgh Investment Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Edinburgh Investment 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 Flutter Entertainment and Edinburgh Investment

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

The idea behind Flutter Entertainment PLC and Edinburgh Investment Trust 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..