Correlation Between Zapata Computing and Playtech Plc

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

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

Diversification Opportunities for Zapata Computing and Playtech Plc

-0.69

Correlation Coefficient

Zapata Computing  Playtech Plc

Excellent diversification

The 3 months correlation between Zapata and Playtech is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Zapata Computing Holdings and Playtech plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playtech plc and Zapata Computing 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 Zapata Computing Holdings are associated (or correlated) with Playtech Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playtech plc has no effect on the direction of Zapata Computing i.e., Zapata Computing and Playtech Plc go up and down completely randomly.

Pair Corralation between Zapata Computing and Playtech Plc

Assuming the 90 days horizon Zapata Computing Holdings is expected to generate 38.24 times more return on investment than Playtech Plc. However, Zapata Computing is 38.24 times more volatile than Playtech plc. It trades about 0.13 of its potential returns per unit of risk. Playtech plc is currently generating about 0.12 per unit of risk. If you would invest  3.80  in Zapata Computing Holdings on September 18, 2024 and sell it today you would lose (3.24) from holding Zapata Computing Holdings or give up 85.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	50.79%
Values	Daily Returns

Zapata Computing Holdings  vs.  Playtech plc

Zapata Computing Holdings

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Zapata Computing Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly fragile basic indicators, Zapata Computing showed solid returns over the last few months and may actually be approaching a breakup point.

Playtech plc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Playtech plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Playtech Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zapata Computing and Playtech Plc

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

The idea behind Zapata Computing Holdings and Playtech 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.