Correlation Between Playtech Plc and Cognizant Technology
Can any of the company-specific risk be diversified away by investing in both Playtech Plc and Cognizant Technology 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 Cognizant Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Playtech Plc and Cognizant Technology Solutions, you can compare the effects of market volatilities on Playtech Plc and Cognizant Technology 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 Cognizant Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Playtech Plc and Cognizant Technology.
Diversification Opportunities for Playtech Plc and Cognizant Technology
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Playtech and Cognizant is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Playtech Plc and Cognizant Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognizant Technology 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 Cognizant Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cognizant Technology has no effect on the direction of Playtech Plc i.e., Playtech Plc and Cognizant Technology go up and down completely randomly.
Pair Corralation between Playtech Plc and Cognizant Technology
Assuming the 90 days trading horizon Playtech Plc is expected to generate 1.39 times more return on investment than Cognizant Technology. However, Playtech Plc is 1.39 times more volatile than Cognizant Technology Solutions. It trades about 0.05 of its potential returns per unit of risk. Cognizant Technology Solutions is currently generating about 0.06 per unit of risk. If you would invest 50,800 in Playtech Plc on September 14, 2024 and sell it today you would earn a total of 23,200 from holding Playtech Plc or generate 45.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Playtech Plc vs. Cognizant Technology Solutions
Performance |
| Timeline |
| Playtech Plc |
| Cognizant Technology |
Playtech Plc and Cognizant Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Playtech Plc and Cognizant Technology
The main advantage of trading using opposite Playtech Plc and Cognizant Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Playtech Plc position performs unexpectedly, Cognizant Technology 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 Cognizant Technology will offset losses from the drop in Cognizant Technology's long position.| Playtech Plc vs. Kinnevik Investment AB | Playtech Plc vs. Oakley Capital Investments | Playtech Plc vs. FC Investment Trust | Playtech Plc vs. United Utilities Group |
| Cognizant Technology vs. Zoom Video Communications | Cognizant Technology vs. Zegona Communications Plc | Cognizant Technology vs. AMG Advanced Metallurgical | Cognizant Technology vs. Empire Metals Limited |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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