Companies with offline gambling facilities in the United Kingdom have encountered an increasing competition by online gambling operators in the recent years. Brick-and-mortar casinos still remained the venues with the largest popularity among gamblers, according to data by the UK Gambling Commission, but the recent rates of growth of the online gambling industry axed gross revenue at traditional establishments.
For the purpose of this article, we selected the top four companies, operating in the offline 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 relationship (correlation) between them.
The group of companies we examined includes Ladbrokes, William Hill, Paddy Power and Rank Group.
Rank Group (RNK)
Among the four companies with offline as well as online gambling facilities, listed on the LSE, the shares of Rank Group had the best performance during the first six months of 2015, yielding 36.28%.
Being part of the FTSE 250, FTSE 350, FTSE All-Share, FTSE 350 Lower Yield, FTSE 350 Travel & Leisure, FTSE All Share Travel & Leisure and FTSE All Share Consumer Services, Rank Group shares closed at 220.30 pence on June 30th 2015, gaining 1.19% on a daily basis, after a loss of 0.14% during the previous trading day. The June 30th 2015 high of 220.30 pence has been the highest price level since June 15th 2015, when a daily high of 225.40 pence was recorded. In addition, the June 30th 2015 rate of increase has been the most notable one since June 24th 2015, when Rank Group shares added 1.72%.
Taking into consideration the period between January 2nd 2013 and December 31st 2014, the stock registered the highest daily high on June 23rd 2014, at 178.80 pence, while the lowest daily low of 119.69 pence was recorded on March 4th 2014.
Shares of Rank Group closed at 161.65 pence on December 31st 2014, gaining 0.28% on a daily basis and following two consecutive daily losses.
Within the period January 2nd 2013-June 30th 2015, shares of the Group generated a capital yield of 52.04%. This ranked the company first within the examined group of entities.
Ladbrokes (LAD)
Shares of Ladbrokes marked the second largest gain within the group during the period December 31st 2014-June 30th 2015, 17.47%.
Being part of the FTSE 250, FTSE 350, FTSE All-Share, FTSE 350 Higher Yield, FTSE All Share Consumer Services, FTSE All Share Travel & Leisure and FTSE 350 Travel & Leisure indexes, the stock closed at 129.80 pence on June 30th 2015, falling 0.76% on the day and marking a fifth consecutive trading session of losses. The daily drop, however, has been the smallest one in the string. The June 30th 2015 low of 128.70 pence has also been the lowest price level since June 23rd 2015, when a daily low of 127.90 pence was recorded.
Taking into consideration the period between January 2nd 2013 and December 31st 2014, the stock registered the highest daily high on March 12th 2013, at 245.00 pence, and the lowest daily low on December 17th 2014, at 105.93 pence.
Shares of Ladbrokes closed at 110.50 pence on December 31st 2014, down 1.69% on a daily basis and also marking a second straight trading session of losses. The daily rate of decrease has been the most considerable one since December 12th 2014, when the shares depreciated 2.47%.
Within the period January 2nd 2013-June 30th 2015, shares of Ladbrokes generated a capital yield of -34.54%. This ranked the company last within the examined group of entities.
Paddy Power Plc (PAP)
During the past six months Paddy Power shares generated a capital yield of 13.27%, which ranked the company third within the examined group of entities.
Shares of Paddy Power closed at EUR 77.010 on June 30th 2015, going up 0.09% on a daily basis and following a 1.35% slump in the prior trading day. On June 29th the company’s shares slid to a daily low at EUR 76.160, which has been the lowest level since March 13th 2015, when the stock registered a daily low of EUR 75.464.
Taking into consideration the period between January 1st 2013 and December 31st 2014, the stock registered the highest daily high on April 2nd 2013, at EUR 71.360, and the lowest daily low on July 2nd 2014, at EUR 47.104.
Paddy Power shares closed at EUR 67.986 on December 31st 2014, adding 0.83% on the day and also marking the sixth consecutive trading day of gains. The December 31st 2015 high has been the highest level since April 4th 2013, when the stock reached a daily high of EUR 69.500.
Within the period January 2nd 2013-June 30th 2015, shares of Paddy Power Plc generated a capital yield of 23.91%. This ranked Paddy Power third within the examined group of companies.
William Hill Plc (WMH)
During the past six months William Hill shares generated a capital yield of 11.20%, which ranked the company fourth within the examined group of entities.
William Hill shares closed at 403.10 pence on June 30th 2015, up 0.05% on a daily basis and following two consecutive trading days of losses. On June 29th the company’s stock slipped to a daily low at 397.60 pence, which has been the lowest price level since May 18th 2015, when it registered a daily low of 395.00 pence.
Taking into consideration the period between January 1st 2013 and December 31st 2014, the stock registered the highest daily high on August 1st 2013, at 494.60 pence, and the lowest daily low on January 11th 2013, at 313.87 pence.
Being a component of the FTSE 250, FTSE 350, FTSE 350 Lower Yield, FTSE All-Share, FTSE 350 Travel & Leisure, FTSE All Share Consumer Services and FTSE All Share Travel & Leisure indexes, William Hill stock closed at 362.50 pence on December 31st 2014, climbing 0.58% on a daily basis and following a 0.61% drop during the preceding trading day. The December 31st 2014 low of 355.00 pence has been the lowest price level since December 22nd 2014, when a daily low of 352.00 pence was recorded.
Within the period January 2nd 2013-June 30th 2015, shares of William Hill generated a capital yield of 24.85%. This ranked William Hill second within the examined group of companies.
Quarterly Performance
| Stock Performance Comparison (Offline and Online Sector Companies) based on Closing Prices in % | |||||
|---|---|---|---|---|---|
| Period | 2014 | ||||
| Company | Annual | Q4 | Q3 | Q2 | Q1 |
| Paddy Power | 9.69 | 18.94 | 19.13 | -16.96 | -6.77 |
| William Hill | -9.80 | -1.97 | 12.74 | -3.81 | -15.15 |
| Ladbrokes | -38.23 | -14.61 | -7.77 | 3.93 | -24.54 |
| Rank Group | 19.74 | 0.40 | -3.65 | 5.69 | 17.11 |
| Stock Performance Comparison (Offline and Online Sector Companies) based on Closing Prices in % | |||||
|---|---|---|---|---|---|
| Period | 2013 | ||||
| Company | Annual | Q4 | Q3 | Q2 | Q1 |
| Paddy Power | -0.28 | 5.08 | -11.01 | -5.62 | 12.98 |
| William Hill | 24.48 | -0.27 | -8.60 | 19.19 | 14.57 |
| Ladbrokes | -9.78 | 5.73 | -15.36 | -11.47 | 13.87 |
| Rank Group | -6.83 | -12.34 | 0.26 | -6.91 | 13.87 |
Within the period 2013-2014, shares of William Hill and Ladbrokes registered gains in three out of eight quarters, while shares of Paddy Power recorded gains in four out of eight quarters, with two of them being consecutive ones. Shares of Rank Group had five quarters of gains, with two 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 William Hill (14.57%).
William Hill has also been the only company, whose shares rose in the second quarter of 2013, up by 19.19%, while shares of Ladbrokes had the largest quarterly drop, or 11.47%. Ladbrokes shares plunged at the steepest quarterly rate in Q3 2013 (-15.36%), Q1 2014 (-24.54%), Q3 2014 (-7.77%) and Q4 2014 (-14.61%) as well.
Rank Group has been the only company, whose shares surged in the third quarter of 2013 (by 0.26%) and in the first quarter of 2014 (by 17.11%).
William Hill and Paddy Power have been the only companies with back-to-back share price declines during Q1 and Q2 2014, while Rank Group has been the only company with back-to-back share price gains during the same period.
During the period January 2nd-December 31st 2014, the largest share price decline was observed at Ladbrokes (-38.23%), while the largest share price gain – at Rank Group (19.74%).
William Hill has been the only company, whose shares rose during the period January 2nd-December 31st 2013, up 24.48%. Within the remaining companies in the examined group, the largest annual decline was observed at Ladbrokes (-9.78%).
Correlation Analysis
We examined the correlation between the four companies by using two time periods – January 1st to June 29th 2015 and January 2nd 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 2nd 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 | |||||
|---|---|---|---|---|---|
| Paddy Power | William Hill | Ladbrokes | Rank | ||
| Paddy Power | 1.00 | 0.4324 | -0.0671 | 0.6909 | |
| William Hill | 0.4324 | 1.00 | 0.7296 | 0.8240 | |
| Ladbrokes | -0.0671 | 0.7296 | 1.00 | 0.5309 | |
| Rank | 0.6909 | 0.8240 | 0.5309 | 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 Paddy Power to William Hill is the same relation as William Hill to Paddy Power, then their correlation coefficient will be one and the same.
It becomes evident that the shares of Paddy Power had a moderate positive correlation with the shares of William Hill, but moved strongly in one and the same direction with the shares of Rank Group during the examined period. On the other hand, Paddy Power shares moved almost independently compared to the shares of Ladbrokes.
William Hill shares showed a strong positive correlation with the shares of Ladbrokes and a significantly strong positive correlation with the shares of Rank Group.
Ladbrokes shares had a moderate-to-strong positive correlation with the shares of Rank Group during the examined period.
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 | |||||
|---|---|---|---|---|---|
| Paddy Power | William Hill | Ladbrokes | Rank | ||
| Paddy Power | 1.00 | 0.5513 | 0.5864 | -0.1031 | |
| William Hill | 0.5513 | 1.00 | 0.6598 | -0.0529 | |
| Ladbrokes | 0.5864 | 0.6598 | 1.00 | -0.1173 | |
| Rank | -0.1031 | -0.0529 | -0.1173 | 1.00 | |
It becomes clear that the shares of Paddy Power showed a strong positive correlation with the shares of William Hill and Ladbrokes, but had an insignificant negative correlation with the shares of Rank Group.
Shares of William Hill moved strongly in one and the same direction with the shares of Ladbrokes during the examined period, but, on the other hand, their movement was almost independent compared to that of Rank Group shares.
The table above also shows that the shares of Ladbrokes had a weak negative correlation with the shares of Rank Group during the period in question.
