Correlation Between Entain Plc and Inspired Entertainment

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

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

Diversification Opportunities for Entain Plc and Inspired Entertainment

-0.11

Correlation Coefficient

Entain Plc  Inspired Entertainment

Good diversification

The 3 months correlation between Entain and Inspired is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Entain Plc and Inspired Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspired Entertainment and Entain Plc 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 Entain Plc are associated (or correlated) with Inspired Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspired Entertainment has no effect on the direction of Entain Plc i.e., Entain Plc and Inspired Entertainment go up and down completely randomly.

Pair Corralation between Entain Plc and Inspired Entertainment

Assuming the 90 days horizon Entain Plc is expected to under-perform the Inspired Entertainment. In addition to that, Entain Plc is 1.1 times more volatile than Inspired Entertainment. It trades about -0.02 of its total potential returns per unit of risk. Inspired Entertainment is currently generating about -0.01 per unit of volatility. If you would invest  1,285  in Inspired Entertainment on September 21, 2024 and sell it today you would lose (429.00) from holding Inspired Entertainment or give up 33.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.78%
Values	Daily Returns

Entain Plc  vs.  Inspired Entertainment

Entain Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Entain Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Inspired Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inspired Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Entain Plc and Inspired Entertainment

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

The idea behind Entain Plc and Inspired Entertainment 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.