Correlation Between Playtech Plc and Traton SE

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

By analyzing existing cross correlation between Playtech plc and Traton SE, you can compare the effects of market volatilities on Playtech Plc and Traton SE 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 Traton SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Playtech Plc and Traton SE.

Diversification Opportunities for Playtech Plc and Traton SE

0.45

Correlation Coefficient

Playtech Plc  Traton SE

Very weak diversification

The 3 months correlation between Playtech and Traton is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Playtech plc and Traton SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Traton SE 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 Traton SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Traton SE has no effect on the direction of Playtech Plc i.e., Playtech Plc and Traton SE go up and down completely randomly.

Pair Corralation between Playtech Plc and Traton SE

Assuming the 90 days trading horizon Playtech Plc is expected to generate 21.16 times less return on investment than Traton SE. But when comparing it to its historical volatility, Playtech plc is 2.1 times less risky than Traton SE. It trades about 0.01 of its potential returns per unit of risk. Traton SE is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,795  in Traton SE on December 30, 2024 and sell it today you would earn a total of  430.00  from holding Traton SE or generate 15.38% return on investment over 90 days.

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

Playtech plc  vs.  Traton SE

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.

Traton SE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Traton SE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Traton SE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Playtech Plc and Traton SE

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

The idea behind Playtech plc and Traton SE 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.