Correlation Between PLAYTECH and USWE SPORTS

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

By analyzing existing cross correlation between PLAYTECH and USWE SPORTS AB, you can compare the effects of market volatilities on PLAYTECH and USWE SPORTS 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 PLAYTECH with a short position of USWE SPORTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of PLAYTECH and USWE SPORTS.

Diversification Opportunities for PLAYTECH and USWE SPORTS

-0.28

Correlation Coefficient

PLAYTECH  USWE SPORTS

Very good diversification

The 3 months correlation between PLAYTECH and USWE is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding PLAYTECH and USWE SPORTS AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USWE SPORTS AB and PLAYTECH 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 PLAYTECH are associated (or correlated) with USWE SPORTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USWE SPORTS AB has no effect on the direction of PLAYTECH i.e., PLAYTECH and USWE SPORTS go up and down completely randomly.

Pair Corralation between PLAYTECH and USWE SPORTS

Assuming the 90 days trading horizon PLAYTECH is expected to under-perform the USWE SPORTS. But the stock apears to be less risky and, when comparing its historical volatility, PLAYTECH is 3.05 times less risky than USWE SPORTS. The stock trades about -0.01 of its potential returns per unit of risk. The USWE SPORTS AB is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  60.00  in USWE SPORTS AB on October 23, 2024 and sell it today you would earn a total of  23.00  from holding USWE SPORTS AB or generate 38.33% return on investment over 90 days.

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

PLAYTECH  vs.  USWE SPORTS AB

PLAYTECH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PLAYTECH has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, PLAYTECH is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

USWE SPORTS AB

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in USWE SPORTS AB are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, USWE SPORTS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PLAYTECH and USWE SPORTS

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

The idea behind PLAYTECH and USWE SPORTS AB 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.