Correlation Between PLAYWAY SA and Ferro SA

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

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

Diversification Opportunities for PLAYWAY SA and Ferro SA

0.69

Correlation Coefficient

PLAYWAY SA  Ferro SA

Poor diversification

The 3 months correlation between PLAYWAY and Ferro is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding PLAYWAY SA and Ferro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferro SA and PLAYWAY SA 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 PLAYWAY SA are associated (or correlated) with Ferro SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferro SA has no effect on the direction of PLAYWAY SA i.e., PLAYWAY SA and Ferro SA go up and down completely randomly.

Pair Corralation between PLAYWAY SA and Ferro SA

Assuming the 90 days trading horizon PLAYWAY SA is expected to generate 1.45 times more return on investment than Ferro SA. However, PLAYWAY SA is 1.45 times more volatile than Ferro SA. It trades about 0.14 of its potential returns per unit of risk. Ferro SA is currently generating about 0.14 per unit of risk. If you would invest  27,200  in PLAYWAY SA on December 2, 2024 and sell it today you would earn a total of  3,350  from holding PLAYWAY SA or generate 12.32% return on investment over 90 days.

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

PLAYWAY SA  vs.  Ferro SA

PLAYWAY SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PLAYWAY SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, PLAYWAY SA reported solid returns over the last few months and may actually be approaching a breakup point.

Ferro SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ferro SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Ferro SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with PLAYWAY SA and Ferro SA

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

The idea behind PLAYWAY SA and Ferro 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..