Premier League Relegation: has the market got it right?

After eleven rounds of the 2015/16 English Premier League there are some clear ideas emerging about who will be relegated, but has the market got it right?

We will look at the Market Implied Probability Of Relegation, the Actual Data and the Fair Data to find out, before offering one possible trade idea:

Market Implied Probability Of Relegation

RelegationProbability

Despite both clubs making managerial changes in recent weeks Sunderland (73.53%) and Aston Villa (69.44%) are considered favourites for the drop, while one of Bournemouth (45.45%), Newcastle (38.02%) and Norwich (37.04%) are considered the most likely to go with them.

West Brom (14.29%), Stoke (8.33%) and Watford (8.33%) are all thought to be at risk too and the implied probability of any other club in the division to be relegated is just 5.57%.

A brief look at the data can provide some explanation of this, as well as opening up a number of interesting back and lay opportunities:

Actual Data

ActualData

To take one example, Watford’s implied relegation probability of just 8.33% from the first graph is a surprise on first sight, but the traditionally available performance metrics actually support the position.

Quique Sanchez Flores’ side have already amassed 16 points, have the best goal difference/defence of all the “at risk” clubs and are in the best immediate form.

Still, to see a newly promoted team at the same price as Premier League regulars Stoke and considered almost half as likely to drop as West Brom is startling at this relatively early stage of the season.

Further questions over their price are raised by a deeper look into the performance metrics:

Fair Data

FairData

The “fair” data believes Watford are currently two positions higher and two points better off than they should be.

While it agrees that they have deserved to take seven points from their last five fixtures, this data also suggests that they have been operating at an unsustainable level in both defence and attack.

They rank 1st for Goals Against, but =3rd for Chances Against and are =5th for Goals For, despite being 8th in Chances For. This translates to them creating fewer Chances per game than every other team in the league.

Trade Idea

Back Watford for relegation at 12.00 or better.

Schedule

-Leicester (a), Man Utd (h), Aston Villa (a), Norwich (h), Sunderland (a), Liverpool (h), Chelsea (a), Tottenham (h), Manchester City (h), Southampton (a) are their next ten games.

-Their price is expected to come in after the next two fixtures, with potential to move back out again before Liverpool (h). This offers a quick exit point and a secondary entry point for the more cautious.

Other Considerations

-Odion Ighalo’s record of 0.72 goals per 90 (second only to Jamie Vardy at 0.82) and 0.93 goals/assists per 90 (third behind Riyad Mahrez at 1.16 and Mesut Özil at 1.06).

-Ighalo and Troy Deeney are responsible for 80% of their total goals.

-Watford have barely been impacted by injuries to date, ranking 6th behind Swansea, Leicester, Chelsea, West Brom and Norwich in this category.