Correlation Between Playtech Plc and Crédit Agricole

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

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

Diversification Opportunities for Playtech Plc and Crédit Agricole

0.44

Correlation Coefficient

Playtech Plc  Crédit Agricole

Very weak diversification

The 3 months correlation between Playtech and Crédit is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Playtech plc and Crdit Agricole SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crdit Agricole SA 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 Crédit Agricole. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crdit Agricole SA has no effect on the direction of Playtech Plc i.e., Playtech Plc and Crédit Agricole go up and down completely randomly.

Pair Corralation between Playtech Plc and Crédit Agricole

Assuming the 90 days trading horizon Playtech Plc is expected to generate 6.6 times less return on investment than Crédit Agricole. But when comparing it to its historical volatility, Playtech plc is 1.01 times less risky than Crédit Agricole. It trades about 0.05 of its potential returns per unit of risk. Crdit Agricole SA is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  1,292  in Crdit Agricole SA on December 26, 2024 and sell it today you would earn a total of  394.00  from holding Crdit Agricole SA or generate 30.5% 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.  Crdit Agricole SA

Playtech plc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Playtech plc are ranked lower than 4 (%) 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.

Crdit Agricole SA

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Crdit Agricole SA are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Crédit Agricole reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Playtech Plc and Crédit Agricole

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

The idea behind Playtech plc and Crdit Agricole SA 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.