Correlation Between Playtika Holding and Solventum Corp

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

By analyzing existing cross correlation between Playtika Holding Corp and Solventum Corp, you can compare the effects of market volatilities on Playtika Holding and Solventum Corp 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 Playtika Holding with a short position of Solventum Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Playtika Holding and Solventum Corp.

Diversification Opportunities for Playtika Holding and Solventum Corp

0.38

Correlation Coefficient

Playtika Holding  Solventum Corp

Weak diversification

The 3 months correlation between Playtika and Solventum is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Playtika Holding Corp and Solventum Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solventum Corp and Playtika Holding 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 Playtika Holding Corp are associated (or correlated) with Solventum Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solventum Corp has no effect on the direction of Playtika Holding i.e., Playtika Holding and Solventum Corp go up and down completely randomly.

Pair Corralation between Playtika Holding and Solventum Corp

Given the investment horizon of 90 days Playtika Holding is expected to generate 1.06 times less return on investment than Solventum Corp. But when comparing it to its historical volatility, Playtika Holding Corp is 1.06 times less risky than Solventum Corp. It trades about 0.16 of its potential returns per unit of risk. Solventum Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  5,745  in Solventum Corp on September 5, 2024 and sell it today you would earn a total of  1,454  from holding Solventum Corp or generate 25.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.82%
Values	Daily Returns

Playtika Holding Corp  vs.  Solventum Corp

Playtika Holding Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Playtika Holding Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Playtika Holding disclosed solid returns over the last few months and may actually be approaching a breakup point.

Solventum Corp

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Solventum Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting essential indicators, Solventum Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Playtika Holding and Solventum Corp

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

The idea behind Playtika Holding Corp and Solventum Corp 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.