Correlation Between Park Hotels and Playtech Plc

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

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

Diversification Opportunities for Park Hotels and Playtech Plc

0.2

Correlation Coefficient

Park Hotels  Playtech Plc

Modest diversification

The 3 months correlation between Park and Playtech is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Park Hotels Resorts and Playtech plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playtech plc and Park Hotels 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 Park Hotels Resorts 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 Park Hotels i.e., Park Hotels and Playtech Plc go up and down completely randomly.

Pair Corralation between Park Hotels and Playtech Plc

Allowing for the 90-day total investment horizon Park Hotels Resorts is expected to under-perform the Playtech Plc. In addition to that, Park Hotels is 2.78 times more volatile than Playtech plc. It trades about -0.1 of its total potential returns per unit of risk. Playtech plc is currently generating about -0.05 per unit of volatility. If you would invest  950.00  in Playtech plc on September 24, 2024 and sell it today you would lose (7.00) from holding Playtech plc or give up 0.74% of portfolio value over 90 days.

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

Park Hotels Resorts  vs.  Playtech plc

Park Hotels Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Park Hotels Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Park Hotels is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Playtech plc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Playtech plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental indicators, Playtech Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Park Hotels and Playtech Plc

The main advantage of trading using opposite Park Hotels and Playtech Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Park Hotels 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 Park Hotels Resorts 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.