Correlation Between CVR Energy and Playtech Plc

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

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

Diversification Opportunities for CVR Energy and Playtech Plc

-0.12

Correlation Coefficient

CVR Energy  Playtech Plc

Good diversification

The 3 months correlation between CVR and Playtech is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding CVR Energy and Playtech Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playtech Plc and CVR Energy 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 CVR Energy 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 CVR Energy i.e., CVR Energy and Playtech Plc go up and down completely randomly.

Pair Corralation between CVR Energy and Playtech Plc

Assuming the 90 days trading horizon CVR Energy is expected to under-perform the Playtech Plc. In addition to that, CVR Energy is 2.02 times more volatile than Playtech Plc. It trades about -0.06 of its total potential returns per unit of risk. Playtech Plc is currently generating about 0.12 per unit of volatility. If you would invest  62,500  in Playtech Plc on September 3, 2024 and sell it today you would earn a total of  10,400  from holding Playtech Plc or generate 16.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

CVR Energy  vs.  Playtech Plc

CVR Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVR Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Playtech Plc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Playtech Plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Playtech Plc unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVR Energy and Playtech Plc

The main advantage of trading using opposite CVR Energy and Playtech Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVR Energy 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 CVR Energy 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.