Correlation Between Games Workshop and Summit Materials

Can any of the company-specific risk be diversified away by investing in both Games Workshop and Summit Materials 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 Summit Materials 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 Summit Materials Cl, you can compare the effects of market volatilities on Games Workshop and Summit Materials 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 Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Games Workshop and Summit Materials.

Diversification Opportunities for Games Workshop and Summit Materials

0.81

Correlation Coefficient

Games Workshop  Summit Materials

Very poor diversification

The 3 months correlation between Games and Summit is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Games Workshop Group and Summit Materials Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials 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 Summit Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Materials has no effect on the direction of Games Workshop i.e., Games Workshop and Summit Materials go up and down completely randomly.

Pair Corralation between Games Workshop and Summit Materials

Assuming the 90 days trading horizon Games Workshop is expected to generate 1.25 times less return on investment than Summit Materials. But when comparing it to its historical volatility, Games Workshop Group is 1.24 times less risky than Summit Materials. It trades about 0.06 of its potential returns per unit of risk. Summit Materials Cl is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,072  in Summit Materials Cl on September 29, 2024 and sell it today you would earn a total of  1,990  from holding Summit Materials Cl or generate 64.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	92.18%
Values	Daily Returns

Games Workshop Group  vs.  Summit Materials Cl

Games Workshop Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Games Workshop Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Games Workshop exhibited solid returns over the last few months and may actually be approaching a breakup point.

Summit Materials

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials Cl are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Summit Materials unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Games Workshop and Summit Materials

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

The idea behind Games Workshop Group and Summit Materials Cl 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.