Correlation Between Timken and Playtika Holding

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

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

Diversification Opportunities for Timken and Playtika Holding

-0.7

Correlation Coefficient

Timken  Playtika Holding

Excellent diversification

The 3 months correlation between Timken and Playtika is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Timken Company and Playtika Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playtika Holding Corp and Timken 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 Timken Company are associated (or correlated) with Playtika Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playtika Holding Corp has no effect on the direction of Timken i.e., Timken and Playtika Holding go up and down completely randomly.

Pair Corralation between Timken and Playtika Holding

Considering the 90-day investment horizon Timken Company is expected to generate 0.77 times more return on investment than Playtika Holding. However, Timken Company is 1.3 times less risky than Playtika Holding. It trades about 0.01 of its potential returns per unit of risk. Playtika Holding Corp is currently generating about 0.0 per unit of risk. If you would invest  6,834  in Timken Company on September 20, 2024 and sell it today you would earn a total of  242.00  from holding Timken Company or generate 3.54% return on investment over 90 days.

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

Timken Company  vs.  Playtika Holding Corp

Timken Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timken Company has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's forward-looking signals remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Playtika Holding Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Playtika Holding Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Timken and Playtika Holding

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

The idea behind Timken Company and Playtika Holding 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.