Correlation Between Playtech Plc and Aristocrat Leisure

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

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

Diversification Opportunities for Playtech Plc and Aristocrat Leisure

0.36

Correlation Coefficient

Playtech Plc  Aristocrat Leisure

Weak diversification

The 3 months correlation between Playtech and Aristocrat is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Playtech plc and Aristocrat Leisure Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristocrat Leisure 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 Aristocrat Leisure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aristocrat Leisure has no effect on the direction of Playtech Plc i.e., Playtech Plc and Aristocrat Leisure go up and down completely randomly.

Pair Corralation between Playtech Plc and Aristocrat Leisure

Assuming the 90 days trading horizon Playtech plc is expected to generate 0.7 times more return on investment than Aristocrat Leisure. However, Playtech plc is 1.44 times less risky than Aristocrat Leisure. It trades about 0.04 of its potential returns per unit of risk. Aristocrat Leisure Limited is currently generating about -0.07 per unit of risk. If you would invest  844.00  in Playtech plc on December 24, 2024 and sell it today you would earn a total of  20.00  from holding Playtech plc or generate 2.37% return on investment over 90 days.

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

Playtech plc  vs.  Aristocrat Leisure Limited

Playtech plc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Playtech plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Playtech Plc is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Aristocrat Leisure

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aristocrat Leisure Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Playtech Plc and Aristocrat Leisure

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

The idea behind Playtech plc and Aristocrat Leisure Limited 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..