Correlation Between Thor Industries and Playtech Plc

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

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

Diversification Opportunities for Thor Industries and Playtech Plc

0.52

Correlation Coefficient

Thor Industries  Playtech Plc

Very weak diversification

The 3 months correlation between Thor and Playtech is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Thor Industries and Playtech plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playtech plc and Thor Industries 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 Thor Industries are associated (or correlated) with Playtech Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playtech plc has no effect on the direction of Thor Industries i.e., Thor Industries and Playtech Plc go up and down completely randomly.

Pair Corralation between Thor Industries and Playtech Plc

Considering the 90-day investment horizon Thor Industries is expected to generate 0.87 times more return on investment than Playtech Plc. However, Thor Industries is 1.16 times less risky than Playtech Plc. It trades about 0.04 of its potential returns per unit of risk. Playtech plc is currently generating about 0.03 per unit of risk. If you would invest  7,929  in Thor Industries on October 24, 2024 and sell it today you would earn a total of  2,291  from holding Thor Industries or generate 28.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.76%
Values	Daily Returns

Thor Industries  vs.  Playtech plc

Thor Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thor Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Thor Industries is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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.

Pair Trading with Thor Industries and Playtech Plc

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

The idea behind Thor Industries and Playtech plc 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.