Online gambling industry in the United Kingdom has been growing at an impressive rates in the recent years. Gross revenue of online gambling providers expanded at an annual rate of 22% in 2014, while expectations point to further increase in revenue figures in 2015 and 2016.
For the purpose of this article, we selected the top four companies, operating in the online gambling sector, whose shares are tradable on the London Stock Exchange. We analysed the shares’ performance during a specified period of time in terms of capital yield and determined the strength of relatonship (correlation) between them. In addition, we determined how these four company shares correlate with the shares of another corporate entity with a sphere of operations, which is closely related with gambling in online environment.
The group of companies we examined includes 32Red, Betfair, 888 Holdings and bwin.party. For the purpose of our correlation analysis, we also featured the software provider Playtech Plc.
32Red (TTRL)
Among the four companies with online gambling facilities, listed on the London Stock Exchange (LSE), the shares of 32Red had the best performance during the first six months of 2015, yielding 56.95%.
Being part of the FTSE AIM All Share Index, the stock closed at 59.250 pence on June 30th 2015, losing 2.07% on a daily basis and also extending losses from the previous trading day. On June 29th 2015 32Red shares marked a daily low at 58.250 pence, or the lowest level since June 22nd 2015, when a daily low of 54.500 pence was registered.
Taking into consideration the period between January 1st 2013 and December 31st 2014, the stock registered the highest daily high on January 30th 2014, at 88.800 pence, while the lowest daily low of 35.500 pence was recorded on December 11th, December 16th and December 24th 2014.
Shares of 32Red closed at 37.750 pence on December 31st 2014, showing no change on a daily basis and following two consecutive daily gains. The December 31st high of 38.875 pence, has also been the highest price level since December 11th 2014, when a daily high of 38.875 pence was recorded.
On December 30th 2014 the stock rose 2.37% on a daily basis, which marked the most significant daily gain since November 18th 2014, when 32Red appreciated 3.73%.
Within the period January 2nd 2013-June 30th 2015, shares of 32Red generated a capital yield of 47.20%. This ranked 32Red second within the examined group of companies.
Source: Investing.com
Betfair Group Plc (BETF)
Shares of Betfair marked the second largest gain within the group during the period December 31st 2014-June 30th 2015, 53.49%.
Being part of the FTSE 250, FTSE 350, FTSE All-Share, FTSE 350 Lower Yield, FTSE All Share Consumer Services, FTSE All Share Travel & Leisure and FTSE 350 Travel & Leisure indexes, the stock closed at 2 406.00 pence on June 30th 2015, gaining 1.95% on the day. The daily gain has been the most notable one since May 27th 2015, when Betfair appreciated 2.21%. On June 30th the stock fell to a daily low at 2 332.00 pence, or the lowest level since June 18th, when a daily low of 2 329.80 pence was registered.
Taking into consideration the period between January 1st 2013 and December 31st 2014, the stock registered the highest daily high on December 31st 2014, at 1 574.00 pence, and the lowest daily low on January 8th 2013, at 641.50 pence.
Shares of Betfair closed at 1 567.50 pence on December 31st 2014, surging 2.15% on a daily basis and also marking a third straight trading session of gains. The daily rate of increase has been the most considerable one since December 10th 2014, when the shares went up 2.46%, while the daily low of 1 486.30 pence has been the lowest since December 24th 2014, when a daily low of 1 482.70 pence was recorded.
Within the period January 2nd 2013-June 30th 2015, shares of Betfair generated an astounding capital yield of 250.47%. This ranked Betfair first within the examined group of companies.
Source: Investing.com
888 Holdings (888)
During the past six months 888 shares generated a capital yield of 10.11%, which ranked them third within the examined group of companies.
Shares of 888 closed at 152.50 pence on June 30th 2015, showing no change on a daily basis and following two consecutive daily losses. On June 29th the company’s shares slid to a daily low at 148.50 pence, which has been the lowest level since April 23rd 2015, when the stock registered a low of 147.00 pence.
Taking into consideration the period between January 1st 2013 and December 31st 2014, the stock registered the highest daily high on May 9th 2013, at 186.80 pence, and the lowest daily low on January 15th 2013, at 109.00 pence.
Being a component of the FTSE All-Share, FTSE SmallCap, FTSE All Share Consumer Services and FTSE All Share Travel & Leisure indexes, 888 shares closed at 138.50 pence on December 31st 2014, losing 0.36% for the day. The daily high has also been the highest level since December 24th 2014, when the stock reached 142.00 pence. In addition, the daily loss has been the smallest one since December 11th 2014, when the company’s shares went down 0.35%.
Within the period January 2nd 2013-June 30th 2015, shares of 888 generated a capital yield of 27.88%. This ranked 888 third within the examined group of companies.
Source: Investing.com
bwin.party digital entertainment plc (BPTY)
bwin.party has been the only company within the examined group to post a decline in its share price during the past six months. The stock plunged 16.94%.
bwin.party shares closed at 97.85 pence on June 30th 2015, down 0.15% for the day and also marking a fifth consecutive trading day of losses. On June 29th the company’s stock slipped to a daily low at 94.60 pence, which has been the lowest price level since June 12th 2015, when it registered a low of 91.85 pence.
Taking into consideration the period between January 1st 2013 and December 31st 2014, the stock registered the highest daily high on March 6th 2013, at 159.50 pence, and the lowest daily low on August 29th 2014, at 79.00 pence.
Being a component of the FTSE 250, FTSE 350, FTSE 350 Higher Yield, FTSE All-Share, FTSE 350 Travel & Leisure, FTSE All Share Consumer Services and FTSE All Share Travel & Leisure indexes, bwin.party shares closed at 117.80 pence on December 31st 2014, climbing 1.38% on a daily basis and extending gains from the preceding trading day. The December 31st low of 105.44 pence has been the lowest price level since December 17th 2014, when a daily low of 102.50 pence was recorded.
Within the period January 2nd 2013-June 30th 2015, shares of bwin.party generated a capital yield of -12.01%. This ranked bwin.party last within the examined group of companies.
Source: Investing.com
Quarterly Performance
| Stock Performance Comparison (Online Sector Companies) based on Closing Prices in % (2014) | |||||
|---|---|---|---|---|---|
| Company | Annual | Q4 | Q3 | Q2 | Q1 |
| 888 | -19.71 | 6.54 | 8.79 | -20.70 | -12.64 |
| 32Red | -45.68 | -31.36 | 9.45 | -22.09 | -7.19 |
| Betfair | 45.56 | 34.60 | 14.06 | -7.42 | 2.41 |
| bwin.party | -4.31 | 29.74 | -10.79 | -24.13 | 2.84 |
| Stock Performance Comparison (Online Sector Companies) based on Closing Prices in % (2013) | |||||
|---|---|---|---|---|---|
| Company | Annual | Q4 | Q3 | Q2 | Q1 |
| 888 | 44.65 | 3.60 | 12.80 | -12.14 | 40.88 |
| 32Red | 72.67 | 8.59 | 26.73 | -8.18 | 36.65 |
| Betfair | 56.87 | 5.06 | 20.59 | 20.91 | 2.40 |
| bwin.party | 10.70 | 0.82 | 8.24 | -21.45 | 29.14 |
Within the period 2013-2014, shares of 888 and bwin.party registered gains in five out of eight quarters, while shares of 32Red recorded gains in four out of eight quarters. Shares of Betfair had seven quarters of gains, with five of them being consecutive ones.
All four companies had their shares boosted during the first quarter of 2013, as the most notable gain was observed at 888 (40.88%).
Betfair has been the only company, whose shares rose in the second quarter of 2013, up by 20.91%, while shares of bwin.party had the largest quarterly drop, or 21.45%.
All four companies had their shares recorded back-to-back gains in Q3 and Q4 2013, as the most considerable increase in both quarters was observed at 32Red (26.73% in Q3 and 8.59% in Q4).
In Q2 2014 the shares of all four companies registered a decline, with the largest one being at bwin.party (-24.13%).
888 and Betfair have been the only companies, whose shares had back-to-back gains in Q3 and Q4 2014, as the most significant increase in both quarters was observed at Betfair (14.06% in Q3 and 34.60% in Q4).
Betfair has been the only company, whose shares surged during the period January 2nd-December 31st 2014, up 45.56%. Within the remaining companies in the examined group, the largest annual decline was observed at 32Red (-45.68%).
During the period January 2nd-December 31st 2013, all four companies had their shares boosted, as the most notable increase was observed at 32Red (72.67%).
Correlation Analysis
We examined the correlation between the four companies by using two time periods – January 1st to June 29th 2015 and January 1st 2013 to December 31st 2014. The correlation coefficients, which can be found in the tables below, are based on closing prices of shares and daily time frame regarding the period between January 1st and June 29th 2015. The correlation coefficients regarding the period between January 1st 2013 and December 31st 2014, on the other hand, are based on closing prices of shares and weekly time frame.
Positive coefficients suggest that shares of the respective companies move to a certain extent in one and the same direction, while negative coefficients suggest the opposite. In case the coefficients tend to be in proximity to or equal to 0, this is indicative of no relation between shares (they tend to move independently). Values of +1 suggest that the respective shares move equally in one and the same direction, while values of -1 suggest that movement is equal, but in opposite directions. We employ the following table, which represents the strength of relationship:
| Coefficient | Strength of relationship |
|---|---|
| -1.00 to -0.80 or 0.80 to 1.00 | Very strong or Perfect |
| -0.80 to -0.50 or 0.50 to 0.80 | Strong |
| -0.50 to -0.30 or 0.30 to 0.50 | Moderate |
| -0.30 to -0.10 or 0.10 to 0.30 | Weak |
| -0.10 to 0 or 0 to 0.10 | Very Weak or None |
First, let us examine the most recent period – January 1st to June 29th 2015.
| Correlation Coefficients regarding the period January 1st – June 29th 2015 | |||||
|---|---|---|---|---|---|
| 888 | 32Red | Betfair | bwin.party | Playtech | |
| 888 | 1.00 | 0.5988 | 0.6636 | -0.2694 | 0.7742 |
| 32Red | 0.5988 | 1.00 | 0.6752 | -0.6710 | 0.7460 |
| Betfair | 0.6636 | 0.6752 | 1.00 | -0.2054 | 0.9247 |
| Bwin.Party | -0.2694 | -0.6710 | -0.2054 | 1.00 | -0.3216 |
| Playtech | 0.7742 | 0.7460 | 0.9247 | -0.3216 | 1.00 |
If we cross every column and every row, we are able to spot the correlation coefficient for the respective company shares. As each company is related with itself, then, logically, the coefficient will be 1.00. In addition, as 888 to 32Red is the same relation as 32Red to 888, then their correlation coefficient will be one and the same.
It becomes evident that shares of 888 had a strong positive correlation with the shares of 32Red and Betfair and a weak negative correlation with the shares of bwin.party.
Shares of 32Red moved strongly in one and the same direction with the shares of 888 and Betfair, but also moved strongly in the opposite direction compared to the shares of bwin.party.
Shares of Betfair showed a strong positive correlation with the shares of 888 and 32Red and a weak negative correlation with the shares of bwin.party.
The table also shows that the shares of 888 and 32Red had a strong positive correlation with the shares of Playtech, while the shares of Betfair moved almost equally in one and the same direction with the shares of Playtech during the examined period. At the same time, the shares of bwin.party showed a moderate negative correlation with the shares of Playtech Plc.
Next, let us examine the period between January 1st 2013 and December 31st 2014.
| Correlation Coefficients regarding the period January 1st 2013 – December 31st 2014 | |||||
|---|---|---|---|---|---|
| 888 | 32Red | Betfair | bwin.party | Playtech | |
| 888 | 1.00 | 0.2949 | -0.1995 | 0.7369 | 0.2117 |
| 32Red | 0.2949 | 1.00 | -0.0424 | 0.1067 | 0.5065 |
| Betfair | -0.1995 | -0.0424 | 1.00 | -0.4891 | 0.6219 |
| bwin.party | 0.7369 | 0.1067 | -0.4891 | 1.00 | -0.1915 |
| Playtech | 0.2117 | 0.5065 | 0.6219 | -0.1915 | 1.00 |
It becomes clear that the shares of 888 had a weak positive correlation with the shares of 32Red, a weak negative correlation with the shares of Betfair, but moved strongly in one and the same direction with the shares of bwin.party.
Shares of 32Red showed a weak positive correlation with the shares of 888 and bwin.party during the examined period, but moved almost independently compared to the shares of Betfair.
Shares of bwin.party had a strong positive correlation with the shares of 888, a weak positive correlation with the shares of 32Red and a moderate negative correlation with the shares of Betfair.
The table above also shows that the shares of Betfair and 32Red moved strongly in one and the same direction with the shares of Playtech Plc during the examined period, while the shares of 888 had a weak positive correlation with the shares of the software provider. On the other hand, the shares of bwin.party had a weak negative correlation with the shares of Playtech during the period.
