Correlation Between CD PROJEKT and Action SA

Can any of the company-specific risk be diversified away by investing in both CD PROJEKT and Action SA 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 CD PROJEKT and Action SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for CD PROJEKT and Action SA

0.43

Correlation Coefficient

CD PROJEKT  Action SA

Very weak diversification

The 3 months correlation between CDR and Action is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding CD PROJEKT SA and Action SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Action SA and CD PROJEKT 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 CD PROJEKT SA are associated (or correlated) with Action SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Action SA has no effect on the direction of CD PROJEKT i.e., CD PROJEKT and Action SA go up and down completely randomly.

Pair Corralation between CD PROJEKT and Action SA

Assuming the 90 days trading horizon CD PROJEKT SA is expected to generate 2.11 times more return on investment than Action SA. However, CD PROJEKT is 2.11 times more volatile than Action SA. It trades about 0.1 of its potential returns per unit of risk. Action SA is currently generating about 0.0 per unit of risk. If you would invest  19,145  in CD PROJEKT SA on December 30, 2024 and sell it today you would earn a total of  2,695  from holding CD PROJEKT SA or generate 14.08% return on investment over 90 days.

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

CD PROJEKT SA  vs.  Action SA

CD PROJEKT SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CD PROJEKT SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, CD PROJEKT reported solid returns over the last few months and may actually be approaching a breakup point.

Action SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Action SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Action SA is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with CD PROJEKT and Action SA

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

The idea behind CD PROJEKT SA and Action 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.