Correlation Between Playtech Plc and WESTERN NEW

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

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

Diversification Opportunities for Playtech Plc and WESTERN NEW

0.66

Correlation Coefficient

Playtech Plc  WESTERN NEW

Poor diversification

The 3 months correlation between Playtech and WESTERN is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Playtech plc and WESTERN NEW ENGL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTERN NEW ENGL and Playtech Plc 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 plc are associated (or correlated) with WESTERN NEW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESTERN NEW ENGL has no effect on the direction of Playtech Plc i.e., Playtech Plc and WESTERN NEW go up and down completely randomly.

Pair Corralation between Playtech Plc and WESTERN NEW

Assuming the 90 days trading horizon Playtech plc is expected to under-perform the WESTERN NEW. But the stock apears to be less risky and, when comparing its historical volatility, Playtech plc is 1.5 times less risky than WESTERN NEW. The stock trades about -0.08 of its potential returns per unit of risk. The WESTERN NEW ENGL is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  854.00  in WESTERN NEW ENGL on December 11, 2024 and sell it today you would earn a total of  1.00  from holding WESTERN NEW ENGL or generate 0.12% return on investment over 90 days.

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

Playtech plc  vs.  WESTERN NEW ENGL

Playtech plc

Risk-Adjusted Performance

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

WESTERN NEW ENGL

Risk-Adjusted Performance

Very Weak

Over the last 90 days WESTERN NEW ENGL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, WESTERN NEW is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Playtech Plc and WESTERN NEW

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

The idea behind Playtech plc and WESTERN NEW ENGL 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.