Correlation Between GBS Software and Playtech Plc

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

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

Diversification Opportunities for GBS Software and Playtech Plc

-0.52

Correlation Coefficient

GBS Software  Playtech Plc

Excellent diversification

The 3 months correlation between GBS and Playtech is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding GBS Software AG and Playtech plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playtech plc and GBS Software 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 GBS Software AG 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 GBS Software i.e., GBS Software and Playtech Plc go up and down completely randomly.

Pair Corralation between GBS Software and Playtech Plc

Assuming the 90 days trading horizon GBS Software AG is expected to generate 2.69 times more return on investment than Playtech Plc. However, GBS Software is 2.69 times more volatile than Playtech plc. It trades about 0.17 of its potential returns per unit of risk. Playtech plc is currently generating about -0.01 per unit of risk. If you would invest  242.00  in GBS Software AG on October 23, 2024 and sell it today you would earn a total of  68.00  from holding GBS Software AG or generate 28.1% return on investment over 90 days.

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

GBS Software AG  vs.  Playtech plc

GBS Software AG

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GBS Software AG are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GBS Software unveiled solid returns over the last few months and may actually be approaching a breakup point.

Playtech plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Playtech plc has generated negative risk-adjusted returns adding no value to investors with long positions. 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 GBS Software and Playtech Plc

The main advantage of trading using opposite GBS Software and Playtech Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GBS Software 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 GBS Software AG 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.