Correlation Between Playtech Plc and Occidental

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

By analyzing existing cross correlation between Playtech plc and Occidental Petroleum 44, you can compare the effects of market volatilities on Playtech Plc and Occidental 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 Occidental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Playtech Plc and Occidental.

Diversification Opportunities for Playtech Plc and Occidental

0.12

Correlation Coefficient

Playtech Plc  Occidental

Average diversification

The 3 months correlation between Playtech and Occidental is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Playtech plc and Occidental Petroleum 44 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Occidental Petroleum 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 Occidental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Occidental Petroleum has no effect on the direction of Playtech Plc i.e., Playtech Plc and Occidental go up and down completely randomly.

Pair Corralation between Playtech Plc and Occidental

Assuming the 90 days horizon Playtech plc is expected to under-perform the Occidental. But the pink sheet apears to be less risky and, when comparing its historical volatility, Playtech plc is 2.11 times less risky than Occidental. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Occidental Petroleum 44 is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  7,473  in Occidental Petroleum 44 on October 24, 2024 and sell it today you would earn a total of  1,102  from holding Occidental Petroleum 44 or generate 14.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	74.58%
Values	Daily Returns

Playtech plc  vs.  Occidental Petroleum 44

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. Despite nearly stable fundamental indicators, Playtech Plc is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Occidental Petroleum

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Occidental Petroleum 44 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Occidental sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Playtech Plc and Occidental

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

The idea behind Playtech plc and Occidental Petroleum 44 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.