Correlation Between New Tech and PLAYWAY SA

Can any of the company-specific risk be diversified away by investing in both New Tech and PLAYWAY SA 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 New Tech and PLAYWAY SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between New Tech Venture and PLAYWAY SA, you can compare the effects of market volatilities on New Tech and PLAYWAY SA 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 New Tech with a short position of PLAYWAY SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Tech and PLAYWAY SA.

Diversification Opportunities for New Tech and PLAYWAY SA

0.15

Correlation Coefficient

New Tech  PLAYWAY SA

Average diversification

The 3 months correlation between New and PLAYWAY is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding New Tech Venture and PLAYWAY SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLAYWAY SA and New Tech 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 New Tech Venture are associated (or correlated) with PLAYWAY SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLAYWAY SA has no effect on the direction of New Tech i.e., New Tech and PLAYWAY SA go up and down completely randomly.

Pair Corralation between New Tech and PLAYWAY SA

Assuming the 90 days trading horizon New Tech Venture is expected to generate 5.89 times more return on investment than PLAYWAY SA. However, New Tech is 5.89 times more volatile than PLAYWAY SA. It trades about 0.12 of its potential returns per unit of risk. PLAYWAY SA is currently generating about 0.15 per unit of risk. If you would invest  13.00  in New Tech Venture on November 29, 2024 and sell it today you would earn a total of  6.00  from holding New Tech Venture or generate 46.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	91.38%
Values	Daily Returns

New Tech Venture  vs.  PLAYWAY SA

New Tech Venture

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Tech Venture are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, New Tech reported solid returns over the last few months and may actually be approaching a breakup point.

PLAYWAY SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PLAYWAY SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, PLAYWAY SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New Tech and PLAYWAY SA

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

The idea behind New Tech Venture and PLAYWAY SA 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.

Check out your portfolio center.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.