Correlation Between PLAYMATES TOYS and GAMES OPERATORS

Can any of the company-specific risk be diversified away by investing in both PLAYMATES TOYS and GAMES OPERATORS 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 PLAYMATES TOYS and GAMES OPERATORS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PLAYMATES TOYS and GAMES OPERATORS SA, you can compare the effects of market volatilities on PLAYMATES TOYS and GAMES OPERATORS 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 PLAYMATES TOYS with a short position of GAMES OPERATORS. Check out your portfolio center. Please also check ongoing floating volatility patterns of PLAYMATES TOYS and GAMES OPERATORS.

Diversification Opportunities for PLAYMATES TOYS and GAMES OPERATORS

0.42

Correlation Coefficient

PLAYMATES TOYS  GAMES OPERATORS

Very weak diversification

The 3 months correlation between PLAYMATES and GAMES is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding PLAYMATES TOYS and GAMES OPERATORS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAMES OPERATORS SA and PLAYMATES TOYS 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 PLAYMATES TOYS are associated (or correlated) with GAMES OPERATORS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAMES OPERATORS SA has no effect on the direction of PLAYMATES TOYS i.e., PLAYMATES TOYS and GAMES OPERATORS go up and down completely randomly.

Pair Corralation between PLAYMATES TOYS and GAMES OPERATORS

Assuming the 90 days trading horizon PLAYMATES TOYS is expected to generate 1.57 times more return on investment than GAMES OPERATORS. However, PLAYMATES TOYS is 1.57 times more volatile than GAMES OPERATORS SA. It trades about -0.03 of its potential returns per unit of risk. GAMES OPERATORS SA is currently generating about -0.12 per unit of risk. If you would invest  7.55  in PLAYMATES TOYS on October 24, 2024 and sell it today you would lose (1.05) from holding PLAYMATES TOYS or give up 13.91% of portfolio value over 90 days.

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

PLAYMATES TOYS  vs.  GAMES OPERATORS SA

PLAYMATES TOYS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PLAYMATES TOYS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

GAMES OPERATORS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GAMES OPERATORS SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with PLAYMATES TOYS and GAMES OPERATORS

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

The idea behind PLAYMATES TOYS and GAMES OPERATORS SA 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.