Correlation Between Playtech Plc and Cincinnati Financial

Can any of the company-specific risk be diversified away by investing in both Playtech Plc and Cincinnati 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 Cincinnati 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 Cincinnati Financial Corp, you can compare the effects of market volatilities on Playtech Plc and Cincinnati 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 Cincinnati Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Playtech Plc and Cincinnati Financial.

Diversification Opportunities for Playtech Plc and Cincinnati Financial

-0.05

Correlation Coefficient

Playtech Plc  Cincinnati Financial

Good diversification

The 3 months correlation between Playtech and Cincinnati is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Playtech Plc and Cincinnati Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial Corp 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 Cincinnati Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cincinnati Financial Corp has no effect on the direction of Playtech Plc i.e., Playtech Plc and Cincinnati Financial go up and down completely randomly.

Pair Corralation between Playtech Plc and Cincinnati Financial

Assuming the 90 days trading horizon Playtech Plc is expected to generate 0.71 times more return on investment than Cincinnati Financial. However, Playtech Plc is 1.42 times less risky than Cincinnati Financial. It trades about 0.01 of its potential returns per unit of risk. Cincinnati Financial Corp is currently generating about -0.06 per unit of risk. If you would invest  73,000  in Playtech Plc on December 3, 2024 and sell it today you would earn a total of  300.00  from holding Playtech Plc or generate 0.41% 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.  Cincinnati Financial Corp

Playtech Plc

Risk-Adjusted Performance

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Cincinnati Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cincinnati Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cincinnati Financial is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Playtech Plc and Cincinnati Financial

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

The idea behind Playtech Plc and Cincinnati Financial 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.