Correlation Between Flutter Entertainment and XLMedia PLC

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

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

Diversification Opportunities for Flutter Entertainment and XLMedia PLC

0.64

Correlation Coefficient

Flutter Entertainment  XLMedia PLC

Poor diversification

The 3 months correlation between Flutter and XLMedia is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Flutter Entertainment PLC and XLMedia PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XLMedia PLC and Flutter Entertainment 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 Flutter Entertainment PLC are associated (or correlated) with XLMedia PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XLMedia PLC has no effect on the direction of Flutter Entertainment i.e., Flutter Entertainment and XLMedia PLC go up and down completely randomly.

Pair Corralation between Flutter Entertainment and XLMedia PLC

Assuming the 90 days trading horizon Flutter Entertainment PLC is expected to generate 0.57 times more return on investment than XLMedia PLC. However, Flutter Entertainment PLC is 1.76 times less risky than XLMedia PLC. It trades about 0.2 of its potential returns per unit of risk. XLMedia PLC is currently generating about 0.11 per unit of risk. If you would invest  1,684,000  in Flutter Entertainment PLC on September 13, 2024 and sell it today you would earn a total of  505,000  from holding Flutter Entertainment PLC or generate 29.99% return on investment over 90 days.

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

Flutter Entertainment PLC  vs.  XLMedia PLC

Flutter Entertainment PLC

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Flutter Entertainment PLC are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Flutter Entertainment unveiled solid returns over the last few months and may actually be approaching a breakup point.

XLMedia PLC

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Flutter Entertainment and XLMedia PLC

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

The idea behind Flutter Entertainment PLC and XLMedia 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.