Correlation Between Playtech Plc and Amazon

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

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

Diversification Opportunities for Playtech Plc and Amazon

0.1

Correlation Coefficient

Playtech Plc  Amazon

Average diversification

The 3 months correlation between Playtech and Amazon is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Playtech plc and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Playtech Plc i.e., Playtech Plc and Amazon go up and down completely randomly.

Pair Corralation between Playtech Plc and Amazon

Assuming the 90 days trading horizon Playtech Plc is expected to generate 1.36 times less return on investment than Amazon. But when comparing it to its historical volatility, Playtech plc is 1.27 times less risky than Amazon. It trades about 0.11 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  15,532  in Amazon Inc on December 5, 2024 and sell it today you would earn a total of  3,842  from holding Amazon Inc or generate 24.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.19%
Values	Daily Returns

Playtech plc  vs.  Amazon Inc

Playtech plc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Playtech plc are ranked lower than 1 (%) 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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Amazon Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Playtech Plc and Amazon

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

The idea behind Playtech plc and Amazon 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.