Correlation Between Games Workshop and RELIANCE STEEL

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

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

Diversification Opportunities for Games Workshop and RELIANCE STEEL

0.63

Correlation Coefficient

Games Workshop  RELIANCE STEEL

Poor diversification

The 3 months correlation between Games and RELIANCE is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Games Workshop Group and RELIANCE STEEL AL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RELIANCE STEEL AL and Games Workshop 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 Games Workshop Group are associated (or correlated) with RELIANCE STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RELIANCE STEEL AL has no effect on the direction of Games Workshop i.e., Games Workshop and RELIANCE STEEL go up and down completely randomly.

Pair Corralation between Games Workshop and RELIANCE STEEL

Assuming the 90 days trading horizon Games Workshop Group is expected to generate 1.73 times more return on investment than RELIANCE STEEL. However, Games Workshop is 1.73 times more volatile than RELIANCE STEEL AL. It trades about 0.13 of its potential returns per unit of risk. RELIANCE STEEL AL is currently generating about 0.01 per unit of risk. If you would invest  12,526  in Games Workshop Group on September 24, 2024 and sell it today you would earn a total of  3,164  from holding Games Workshop Group or generate 25.26% return on investment over 90 days.

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

Games Workshop Group  vs.  RELIANCE STEEL AL

Games Workshop Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Games Workshop Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Games Workshop unveiled solid returns over the last few months and may actually be approaching a breakup point.

RELIANCE STEEL AL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RELIANCE STEEL AL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, RELIANCE STEEL is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Games Workshop and RELIANCE STEEL

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

The idea behind Games Workshop Group and RELIANCE STEEL AL 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.