Correlation Between Empire Metals and Games Workshop

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

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

Diversification Opportunities for Empire Metals and Games Workshop

-0.62

Correlation Coefficient

Empire Metals  Games Workshop

Excellent diversification

The 3 months correlation between Empire and Games is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Empire Metals Limited 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 Empire Metals 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 Empire Metals Limited 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 Empire Metals i.e., Empire Metals and Games Workshop go up and down completely randomly.

Pair Corralation between Empire Metals and Games Workshop

Assuming the 90 days trading horizon Empire Metals Limited is expected to under-perform the Games Workshop. In addition to that, Empire Metals is 2.38 times more volatile than Games Workshop Group. It trades about -0.01 of its total potential returns per unit of risk. Games Workshop Group is currently generating about 0.09 per unit of volatility. If you would invest  960,030  in Games Workshop Group on September 17, 2024 and sell it today you would earn a total of  431,970  from holding Games Workshop Group or generate 45.0% return on investment over 90 days.

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

Empire Metals Limited  vs.  Games Workshop Group

Empire Metals Limited

Risk-Adjusted Performance

0 of 100

Very Weak

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

Games Workshop Group

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Games Workshop Group are ranked lower than 15 (%) 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 Empire Metals and Games Workshop

The main advantage of trading using opposite Empire Metals and Games Workshop positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire Metals 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 Empire Metals Limited 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.