Correlation Between Playtech Plc and SIMS METAL
Can any of the company-specific risk be diversified away by investing in both Playtech Plc and SIMS METAL 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 SIMS METAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Playtech plc and SIMS METAL MGT, you can compare the effects of market volatilities on Playtech Plc and SIMS METAL 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 SIMS METAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Playtech Plc and SIMS METAL.
Diversification Opportunities for Playtech Plc and SIMS METAL
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Playtech and SIMS is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Playtech plc and SIMS METAL MGT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIMS METAL MGT 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 SIMS METAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIMS METAL MGT has no effect on the direction of Playtech Plc i.e., Playtech Plc and SIMS METAL go up and down completely randomly.
Pair Corralation between Playtech Plc and SIMS METAL
Assuming the 90 days trading horizon Playtech plc is expected to under-perform the SIMS METAL. But the stock apears to be less risky and, when comparing its historical volatility, Playtech plc is 2.1 times less risky than SIMS METAL. The stock trades about -0.06 of its potential returns per unit of risk. The SIMS METAL MGT is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 720.00 in SIMS METAL MGT on August 25, 2024 and sell it today you would earn a total of 50.00 from holding SIMS METAL MGT or generate 6.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Playtech plc vs. SIMS METAL MGT
Performance |
| Timeline |
| Playtech plc |
| SIMS METAL MGT |
Playtech Plc and SIMS METAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Playtech Plc and SIMS METAL
The main advantage of trading using opposite Playtech Plc and SIMS METAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Playtech Plc position performs unexpectedly, SIMS METAL 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 SIMS METAL will offset losses from the drop in SIMS METAL's long position.| Playtech Plc vs. Apple Inc | Playtech Plc vs. Apple Inc | Playtech Plc vs. Apple Inc | Playtech Plc vs. Apple Inc |
Check out your portfolio center.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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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