Correlation Between HE Equipment and Playtech Plc

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

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

Diversification Opportunities for HE Equipment and Playtech Plc

0.63

Correlation Coefficient

HE Equipment  Playtech Plc

Poor diversification

The 3 months correlation between HEES and Playtech is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services and Playtech plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playtech plc and HE Equipment 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 HE Equipment Services 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 HE Equipment i.e., HE Equipment and Playtech Plc go up and down completely randomly.

Pair Corralation between HE Equipment and Playtech Plc

Given the investment horizon of 90 days HE Equipment Services is expected to under-perform the Playtech Plc. In addition to that, HE Equipment is 3.06 times more volatile than Playtech plc. It trades about -0.41 of its total potential returns per unit of risk. Playtech plc is currently generating about -0.05 per unit of volatility. If you would invest  950.00  in Playtech plc on September 28, 2024 and sell it today you would lose (7.00) from holding Playtech plc or give up 0.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

HE Equipment Services  vs.  Playtech plc

HE Equipment Services

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HE Equipment Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, HE Equipment is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Playtech plc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Playtech plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental indicators, Playtech Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HE Equipment and Playtech Plc

The main advantage of trading using opposite HE Equipment and Playtech Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HE Equipment 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 HE Equipment Services 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.