Correlation Between Baked Games and Varsav Game

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

By analyzing existing cross correlation between Baked Games SA and Varsav Game Studios, you can compare the effects of market volatilities on Baked Games and Varsav Game 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 Baked Games with a short position of Varsav Game. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baked Games and Varsav Game.

Diversification Opportunities for Baked Games and Varsav Game

0.08

Correlation Coefficient

Baked Games  Varsav Game

Significant diversification

The 3 months correlation between Baked and Varsav is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Baked Games SA and Varsav Game Studios in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Varsav Game Studios and Baked Games 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 Baked Games SA are associated (or correlated) with Varsav Game. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Varsav Game Studios has no effect on the direction of Baked Games i.e., Baked Games and Varsav Game go up and down completely randomly.

Pair Corralation between Baked Games and Varsav Game

Assuming the 90 days trading horizon Baked Games SA is expected to generate 1.38 times more return on investment than Varsav Game. However, Baked Games is 1.38 times more volatile than Varsav Game Studios. It trades about 0.08 of its potential returns per unit of risk. Varsav Game Studios is currently generating about 0.05 per unit of risk. If you would invest  281.00  in Baked Games SA on December 30, 2024 and sell it today you would earn a total of  54.00  from holding Baked Games SA or generate 19.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Baked Games SA  vs.  Varsav Game Studios

Baked Games SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Baked Games SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Baked Games reported solid returns over the last few months and may actually be approaching a breakup point.

Varsav Game Studios

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Varsav Game Studios are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Varsav Game reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Baked Games and Varsav Game

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

The idea behind Baked Games SA and Varsav Game Studios 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.