Correlation Between CATLIN GROUP and Games Workshop

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

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

Diversification Opportunities for CATLIN GROUP and Games Workshop

-0.8

Correlation Coefficient

CATLIN GROUP  Games Workshop

Pay attention - limited upside

The 3 months correlation between CATLIN and Games is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding CATLIN GROUP 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 CATLIN GROUP 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 CATLIN GROUP 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 CATLIN GROUP i.e., CATLIN GROUP and Games Workshop go up and down completely randomly.

Pair Corralation between CATLIN GROUP and Games Workshop

Assuming the 90 days trading horizon CATLIN GROUP is expected to under-perform the Games Workshop. But the stock apears to be less risky and, when comparing its historical volatility, CATLIN GROUP is 2.94 times less risky than Games Workshop. The stock trades about -0.1 of its potential returns per unit of risk. The Games Workshop Group is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,054,484  in Games Workshop Group on September 16, 2024 and sell it today you would earn a total of  337,516  from holding Games Workshop Group or generate 32.01% return on investment over 90 days.

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

CATLIN GROUP   vs.  Games Workshop Group

CATLIN GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CATLIN GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, CATLIN GROUP 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

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Games Workshop Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak 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 CATLIN GROUP and Games Workshop

The main advantage of trading using opposite CATLIN GROUP and Games Workshop positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CATLIN GROUP 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 CATLIN GROUP 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..