Can any of the company-specific risk be diversified away by investing in both Playtika Holding and Ubisoft Entertainment 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 Ubisoft Entertainment 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 Ubisoft Entertainment, you can compare the effects of market volatilities on Playtika Holding and Ubisoft Entertainment 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 Ubisoft Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Playtika Holding and Ubisoft Entertainment.
Diversification Opportunities for Playtika Holding and Ubisoft Entertainment
The 3 months correlation between Playtika and Ubisoft is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Playtika Holding Corp and Ubisoft Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ubisoft Entertainment 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 Ubisoft Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ubisoft Entertainment has no effect on the direction of Playtika Holding i.e., Playtika Holding and Ubisoft Entertainment go up and down completely randomly.
Pair Corralation between Playtika Holding and Ubisoft Entertainment
Given the investment horizon of 90 days Playtika Holding Corp is expected to generate 0.9 times more return on investment than Ubisoft Entertainment. However, Playtika Holding Corp is 1.12 times less risky than Ubisoft Entertainment. It trades about 0.2 of its potential returns per unit of risk. Ubisoft Entertainment is currently generating about 0.08 per unit of risk. If you would invest 668.00 in Playtika Holding Corp on March 6, 2024 and sell it today you would earn a total of 225.00 from holding Playtika Holding Corp or generate 33.68% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Playtika Holding Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Playtika Holding disclosed solid returns over the last few months and may actually be approaching a breakup point.
Compared to the overall equity markets, risk-adjusted returns on investments in Ubisoft Entertainment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Ubisoft Entertainment reported solid returns over the last few months and may actually be approaching a breakup point.