Correlation Between Soft World and GAME HOURS

Can any of the company-specific risk be diversified away by investing in both Soft World and GAME HOURS 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 Soft World and GAME HOURS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Soft World International and GAME HOURS, you can compare the effects of market volatilities on Soft World and GAME HOURS 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 Soft World with a short position of GAME HOURS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Soft World and GAME HOURS.

Diversification Opportunities for Soft World and GAME HOURS

0.17

Correlation Coefficient

Soft World  GAME HOURS

Average diversification

The 3 months correlation between Soft and GAME is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Soft World International and GAME HOURS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAME HOURS and Soft World 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 Soft World International are associated (or correlated) with GAME HOURS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAME HOURS has no effect on the direction of Soft World i.e., Soft World and GAME HOURS go up and down completely randomly.

Pair Corralation between Soft World and GAME HOURS

Assuming the 90 days trading horizon Soft World is expected to generate 46.86 times less return on investment than GAME HOURS. But when comparing it to its historical volatility, Soft World International is 7.21 times less risky than GAME HOURS. It trades about 0.03 of its potential returns per unit of risk. GAME HOURS is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,718  in GAME HOURS on December 21, 2024 and sell it today you would earn a total of  1,857  from holding GAME HOURS or generate 108.09% return on investment over 90 days.

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

Soft World International  vs.  GAME HOURS

Soft World International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Soft World International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Soft World is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

GAME HOURS

Risk-Adjusted Performance

Good

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

Pair Trading with Soft World and GAME HOURS

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

The idea behind Soft World International and GAME HOURS 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.

Check out your portfolio center.

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.