Correlation Between Playtech Plc and Santech Holdings

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

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

Diversification Opportunities for Playtech Plc and Santech Holdings

0.82

Correlation Coefficient

Playtech Plc  Santech Holdings

Very poor diversification

The 3 months correlation between Playtech and Santech is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Playtech plc and Santech Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Santech Holdings 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 Santech Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Santech Holdings has no effect on the direction of Playtech Plc i.e., Playtech Plc and Santech Holdings go up and down completely randomly.

Pair Corralation between Playtech Plc and Santech Holdings

Assuming the 90 days horizon Playtech Plc is expected to generate 29.3 times less return on investment than Santech Holdings. But when comparing it to its historical volatility, Playtech plc is 27.69 times less risky than Santech Holdings. It trades about 0.1 of its potential returns per unit of risk. Santech Holdings Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  58.00  in Santech Holdings Limited on September 3, 2024 and sell it today you would earn a total of  37.00  from holding Santech Holdings Limited or generate 63.79% return on investment over 90 days.

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

Playtech plc  vs.  Santech Holdings Limited

Playtech plc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Playtech plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Playtech Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Santech Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Santech Holdings Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, Santech Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Playtech Plc and Santech Holdings

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

The idea behind Playtech plc and Santech Holdings Limited 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.