Correlation Between PLAYTECH and Adobe

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

By analyzing existing cross correlation between PLAYTECH and Adobe Inc, you can compare the effects of market volatilities on PLAYTECH and Adobe 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 Adobe. Check out your portfolio center. Please also check ongoing floating volatility patterns of PLAYTECH and Adobe.

Diversification Opportunities for PLAYTECH and Adobe

0.59

Correlation Coefficient

PLAYTECH  Adobe

Very weak diversification

The 3 months correlation between PLAYTECH and Adobe is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding PLAYTECH and Adobe Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adobe Inc 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 Adobe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adobe Inc has no effect on the direction of PLAYTECH i.e., PLAYTECH and Adobe go up and down completely randomly.

Pair Corralation between PLAYTECH and Adobe

Assuming the 90 days trading horizon PLAYTECH is expected to generate 0.43 times more return on investment than Adobe. However, PLAYTECH is 2.33 times less risky than Adobe. It trades about -0.01 of its potential returns per unit of risk. Adobe Inc is currently generating about -0.04 per unit of risk. If you would invest  872.00  in PLAYTECH on October 23, 2024 and sell it today you would lose (6.00) from holding PLAYTECH or give up 0.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

PLAYTECH  vs.  Adobe Inc

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.

Adobe Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adobe Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with PLAYTECH and Adobe

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

The idea behind PLAYTECH and Adobe Inc 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.