Correlation Between Playtech Plc and Webster Financial

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

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

Diversification Opportunities for Playtech Plc and Webster Financial

-0.3

Correlation Coefficient

Playtech Plc  Webster Financial

Very good diversification

The 3 months correlation between Playtech and Webster is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Playtech plc and Webster Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webster Financial 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 Webster Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Webster Financial has no effect on the direction of Playtech Plc i.e., Playtech Plc and Webster Financial go up and down completely randomly.

Pair Corralation between Playtech Plc and Webster Financial

Assuming the 90 days trading horizon Playtech plc is expected to under-perform the Webster Financial. But the stock apears to be less risky and, when comparing its historical volatility, Playtech plc is 3.72 times less risky than Webster Financial. The stock trades about -0.06 of its potential returns per unit of risk. The Webster Financial is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  4,106  in Webster Financial on October 10, 2024 and sell it today you would earn a total of  1,244  from holding Webster Financial or generate 30.3% return on investment over 90 days.

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

Playtech plc  vs.  Webster Financial

Playtech plc

Risk-Adjusted Performance

0 of 100

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.

Webster Financial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Webster Financial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Webster Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Playtech Plc and Webster Financial

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

The idea behind Playtech plc and Webster Financial 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.