Correlation Between INSURANCE AUST and Playtech Plc

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

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

Diversification Opportunities for INSURANCE AUST and Playtech Plc

-0.16

Correlation Coefficient

INSURANCE AUST  Playtech Plc

Good diversification

The 3 months correlation between INSURANCE and Playtech is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding INSURANCE AUST GRP and Playtech plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playtech plc and INSURANCE AUST 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 INSURANCE AUST GRP 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 INSURANCE AUST i.e., INSURANCE AUST and Playtech Plc go up and down completely randomly.

Pair Corralation between INSURANCE AUST and Playtech Plc

Assuming the 90 days trading horizon INSURANCE AUST is expected to generate 1.21 times less return on investment than Playtech Plc. But when comparing it to its historical volatility, INSURANCE AUST GRP is 1.3 times less risky than Playtech Plc. It trades about 0.12 of its potential returns per unit of risk. Playtech plc is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  507.00  in Playtech plc on October 5, 2024 and sell it today you would earn a total of  335.00  from holding Playtech plc or generate 66.07% return on investment over 90 days.

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

INSURANCE AUST GRP  vs.  Playtech plc

INSURANCE AUST GRP

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days INSURANCE AUST GRP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather fragile primary indicators, INSURANCE AUST may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 INSURANCE AUST and Playtech Plc

The main advantage of trading using opposite INSURANCE AUST and Playtech Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INSURANCE AUST 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 INSURANCE AUST GRP 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.