Correlation Between Light Wonder and Flutter Entertainment

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

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

Diversification Opportunities for Light Wonder and Flutter Entertainment

-0.17

Correlation Coefficient

Light Wonder  Flutter Entertainment

Good diversification

The 3 months correlation between Light and Flutter is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Light Wonder and Flutter Entertainment PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flutter Entertainment PLC and Light Wonder 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 Light Wonder are associated (or correlated) with Flutter Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flutter Entertainment PLC has no effect on the direction of Light Wonder i.e., Light Wonder and Flutter Entertainment go up and down completely randomly.

Pair Corralation between Light Wonder and Flutter Entertainment

Considering the 90-day investment horizon Light Wonder is expected to generate 2.73 times less return on investment than Flutter Entertainment. In addition to that, Light Wonder is 1.02 times more volatile than Flutter Entertainment PLC. It trades about 0.05 of its total potential returns per unit of risk. Flutter Entertainment PLC is currently generating about 0.14 per unit of volatility. If you would invest  6,822  in Flutter Entertainment PLC on September 20, 2024 and sell it today you would earn a total of  2,990  from holding Flutter Entertainment PLC or generate 43.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	28.43%
Values	Daily Returns

Light Wonder  vs.  Flutter Entertainment PLC

Light Wonder

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Light Wonder has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Flutter Entertainment PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Flutter Entertainment PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Flutter Entertainment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Light Wonder and Flutter Entertainment

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

The idea behind Light Wonder and Flutter Entertainment 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.