Correlation Between Playtika Holding and Stepan

Can any of the company-specific risk be diversified away by investing in both Playtika Holding and Stepan 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 Stepan 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 Stepan Company, you can compare the effects of market volatilities on Playtika Holding and Stepan 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 Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Playtika Holding and Stepan.

Diversification Opportunities for Playtika Holding and Stepan

0.46

Correlation Coefficient

Playtika Holding  Stepan

Very weak diversification

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

Pair Corralation between Playtika Holding and Stepan

Given the investment horizon of 90 days Playtika Holding Corp is expected to under-perform the Stepan. In addition to that, Playtika Holding is 1.08 times more volatile than Stepan Company. It trades about -0.11 of its total potential returns per unit of risk. Stepan Company is currently generating about -0.09 per unit of volatility. If you would invest  7,601  in Stepan Company on September 14, 2024 and sell it today you would lose (187.00) from holding Stepan Company or give up 2.46% of portfolio value over 90 days.

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

Playtika Holding Corp  vs.  Stepan Company

Playtika Holding Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Playtika Holding Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Playtika Holding may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Stepan Company

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Stepan Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Stepan is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Playtika Holding and Stepan

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

The idea behind Playtika Holding Corp and Stepan Company 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.