Correlation Between Playtech Plc and Madison Square

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

By analyzing existing cross correlation between Playtech plc and Madison Square Garden, you can compare the effects of market volatilities on Playtech Plc and Madison Square 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 Madison Square. Check out your portfolio center. Please also check ongoing floating volatility patterns of Playtech Plc and Madison Square.

Diversification Opportunities for Playtech Plc and Madison Square

0.43

Correlation Coefficient

Playtech Plc  Madison Square

Very weak diversification

The 3 months correlation between Playtech and Madison is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Playtech plc and Madison Square Garden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Square Garden 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 Madison Square. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Square Garden has no effect on the direction of Playtech Plc i.e., Playtech Plc and Madison Square go up and down completely randomly.

Pair Corralation between Playtech Plc and Madison Square

Assuming the 90 days trading horizon Playtech Plc is expected to generate 1.01 times less return on investment than Madison Square. In addition to that, Playtech Plc is 1.15 times more volatile than Madison Square Garden. It trades about 0.19 of its total potential returns per unit of risk. Madison Square Garden is currently generating about 0.22 per unit of volatility. If you would invest  18,400  in Madison Square Garden on September 4, 2024 and sell it today you would earn a total of  3,200  from holding Madison Square Garden or generate 17.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Playtech plc  vs.  Madison Square Garden

Playtech plc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Playtech plc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Playtech Plc unveiled solid returns over the last few months and may actually be approaching a breakup point.

Madison Square Garden

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Madison Square Garden are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Madison Square reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Playtech Plc and Madison Square

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

The idea behind Playtech plc and Madison Square Garden 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.