Correlation Between Herc Holdings and Playtech Plc

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

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

Diversification Opportunities for Herc Holdings and Playtech Plc

0.7

Correlation Coefficient

Herc Holdings  Playtech Plc

Poor diversification

The 3 months correlation between Herc and Playtech is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Herc Holdings and Playtech plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playtech plc and Herc Holdings 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 Herc Holdings 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 Herc Holdings i.e., Herc Holdings and Playtech Plc go up and down completely randomly.

Pair Corralation between Herc Holdings and Playtech Plc

Considering the 90-day investment horizon Herc Holdings is expected to under-perform the Playtech Plc. But the stock apears to be less risky and, when comparing its historical volatility, Herc Holdings is 1.37 times less risky than Playtech Plc. The stock trades about -0.44 of its potential returns per unit of risk. The Playtech plc is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest  943.00  in Playtech plc on October 11, 2024 and sell it today you would lose (97.00) from holding Playtech plc or give up 10.29% of portfolio value over 90 days.

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

Herc Holdings  vs.  Playtech plc

Herc Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Herc Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Herc Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Playtech plc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Playtech plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Playtech Plc may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Herc Holdings and Playtech Plc

The main advantage of trading using opposite Herc Holdings and Playtech Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Herc Holdings 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 Herc Holdings 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.