Correlation Between Deluxe and Games Workshop

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

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

Diversification Opportunities for Deluxe and Games Workshop

0.64

Correlation Coefficient

Deluxe  Games Workshop

Poor diversification

The 3 months correlation between Deluxe and Games is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Deluxe 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 Deluxe 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 Deluxe 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 Deluxe i.e., Deluxe and Games Workshop go up and down completely randomly.

Pair Corralation between Deluxe and Games Workshop

Considering the 90-day investment horizon Deluxe is expected to generate 0.87 times more return on investment than Games Workshop. However, Deluxe is 1.15 times less risky than Games Workshop. It trades about 0.12 of its potential returns per unit of risk. Games Workshop Group is currently generating about 0.08 per unit of risk. If you would invest  1,887  in Deluxe on October 12, 2024 and sell it today you would earn a total of  312.00  from holding Deluxe or generate 16.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.72%
Values	Daily Returns

Deluxe  vs.  Games Workshop Group

Deluxe

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deluxe are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, Deluxe showed solid returns over the last few months and may actually be approaching a breakup point.

Games Workshop Group

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Games Workshop Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal forward-looking signals, Games Workshop reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Deluxe and Games Workshop

The main advantage of trading using opposite Deluxe and Games Workshop positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deluxe 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 Deluxe 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.