Correlation Between Chinese Gamer and Gamania Digital

Can any of the company-specific risk be diversified away by investing in both Chinese Gamer and Gamania Digital 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 Chinese Gamer and Gamania Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chinese Gamer International and Gamania Digital Entertainment, you can compare the effects of market volatilities on Chinese Gamer and Gamania Digital 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 Chinese Gamer with a short position of Gamania Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chinese Gamer and Gamania Digital.

Diversification Opportunities for Chinese Gamer and Gamania Digital

0.18

Correlation Coefficient

Chinese Gamer  Gamania Digital

Average diversification

The 3 months correlation between Chinese and Gamania is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Chinese Gamer International and Gamania Digital Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamania Digital Ente and Chinese Gamer 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 Chinese Gamer International are associated (or correlated) with Gamania Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamania Digital Ente has no effect on the direction of Chinese Gamer i.e., Chinese Gamer and Gamania Digital go up and down completely randomly.

Pair Corralation between Chinese Gamer and Gamania Digital

Assuming the 90 days trading horizon Chinese Gamer is expected to generate 2.92 times less return on investment than Gamania Digital. But when comparing it to its historical volatility, Chinese Gamer International is 1.11 times less risky than Gamania Digital. It trades about 0.07 of its potential returns per unit of risk. Gamania Digital Entertainment is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  7,640  in Gamania Digital Entertainment on September 4, 2024 and sell it today you would earn a total of  1,200  from holding Gamania Digital Entertainment or generate 15.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Chinese Gamer International  vs.  Gamania Digital Entertainment

Chinese Gamer Intern

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chinese Gamer International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Chinese Gamer is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Gamania Digital Ente

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gamania Digital Entertainment are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Gamania Digital showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chinese Gamer and Gamania Digital

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

The idea behind Chinese Gamer International and Gamania Digital Entertainment 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.