Correlation Between Playtika Holding and Emerson Electric

Can any of the company-specific risk be diversified away by investing in both Playtika Holding and Emerson Electric 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 Playtika Holding and Emerson Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Playtika Holding Corp and Emerson Electric, you can compare the effects of market volatilities on Playtika Holding and Emerson Electric 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 Playtika Holding with a short position of Emerson Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Playtika Holding and Emerson Electric.

Diversification Opportunities for Playtika Holding and Emerson Electric

0.46

Correlation Coefficient

Playtika Holding  Emerson Electric

Very weak diversification

The 3 months correlation between Playtika and Emerson is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Playtika Holding Corp and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric and Playtika Holding 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 Playtika Holding Corp are associated (or correlated) with Emerson Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerson Electric has no effect on the direction of Playtika Holding i.e., Playtika Holding and Emerson Electric go up and down completely randomly.

Pair Corralation between Playtika Holding and Emerson Electric

Given the investment horizon of 90 days Playtika Holding Corp is expected to under-perform the Emerson Electric. But the stock apears to be less risky and, when comparing its historical volatility, Playtika Holding Corp is 1.01 times less risky than Emerson Electric. The stock trades about -0.13 of its potential returns per unit of risk. The Emerson Electric is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  10,892  in Emerson Electric on September 29, 2024 and sell it today you would earn a total of  1,679  from holding Emerson Electric or generate 15.41% return on investment over 90 days.

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

Playtika Holding Corp  vs.  Emerson Electric

Playtika Holding Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Playtika Holding Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Emerson Electric

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emerson Electric are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal primary indicators, Emerson Electric reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Playtika Holding and Emerson Electric

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

The idea behind Playtika Holding Corp and Emerson Electric 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.