Correlation Between Aeorema Communications and Games Workshop

Can any of the company-specific risk be diversified away by investing in both Aeorema Communications and Games Workshop 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 Aeorema Communications and Games Workshop into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aeorema Communications Plc and Games Workshop Group, you can compare the effects of market volatilities on Aeorema Communications and Games Workshop 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 Aeorema Communications with a short position of Games Workshop. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aeorema Communications and Games Workshop.

Diversification Opportunities for Aeorema Communications and Games Workshop

0.55

Correlation Coefficient

Aeorema Communications  Games Workshop

Very weak diversification

The 3 months correlation between Aeorema and Games is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Aeorema Communications Plc and Games Workshop Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Games Workshop Group and Aeorema Communications 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 Aeorema Communications Plc are associated (or correlated) with Games Workshop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Games Workshop Group has no effect on the direction of Aeorema Communications i.e., Aeorema Communications and Games Workshop go up and down completely randomly.

Pair Corralation between Aeorema Communications and Games Workshop

Assuming the 90 days trading horizon Aeorema Communications is expected to generate 3.86 times less return on investment than Games Workshop. But when comparing it to its historical volatility, Aeorema Communications Plc is 1.61 times less risky than Games Workshop. It trades about 0.04 of its potential returns per unit of risk. Games Workshop Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,204,000  in Games Workshop Group on October 11, 2024 and sell it today you would earn a total of  114,000  from holding Games Workshop Group or generate 9.47% return on investment over 90 days.

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

Aeorema Communications Plc  vs.  Games Workshop Group

Aeorema Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeorema Communications Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Aeorema Communications is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Games Workshop Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Games Workshop Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Games Workshop exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aeorema Communications and Games Workshop

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

The idea behind Aeorema Communications Plc and Games Workshop Group 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.