Correlation Between Verra Mobility and Playtech Plc

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

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

Diversification Opportunities for Verra Mobility and Playtech Plc

-0.11

Correlation Coefficient

Verra Mobility  Playtech Plc

Good diversification

The 3 months correlation between Verra and Playtech is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Verra Mobility Corp and Playtech plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playtech plc and Verra Mobility 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 Verra Mobility Corp 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 Verra Mobility i.e., Verra Mobility and Playtech Plc go up and down completely randomly.

Pair Corralation between Verra Mobility and Playtech Plc

Given the investment horizon of 90 days Verra Mobility Corp is expected to under-perform the Playtech Plc. In addition to that, Verra Mobility is 1.29 times more volatile than Playtech plc. It trades about -0.09 of its total potential returns per unit of risk. Playtech plc is currently generating about -0.04 per unit of volatility. If you would invest  943.00  in Playtech plc on December 20, 2024 and sell it today you would lose (43.00) from holding Playtech plc or give up 4.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Verra Mobility Corp  vs.  Playtech plc

Verra Mobility Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Verra Mobility Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Playtech plc

Risk-Adjusted Performance

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 Verra Mobility and Playtech Plc

The main advantage of trading using opposite Verra Mobility and Playtech Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verra Mobility 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 Verra Mobility Corp 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.