Correlation Between Games Workshop and Vodafone Group

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

Diversification Opportunities for Games Workshop and Vodafone Group

-0.55

Correlation Coefficient

Games Workshop  Vodafone Group

Excellent diversification

The 3 months correlation between Games and Vodafone is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Games Workshop Group and Vodafone Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodafone Group PLC 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 Vodafone Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodafone Group PLC has no effect on the direction of Games Workshop i.e., Games Workshop and Vodafone Group go up and down completely randomly.

Pair Corralation between Games Workshop and Vodafone Group

Assuming the 90 days trading horizon Games Workshop Group is expected to generate 1.53 times more return on investment than Vodafone Group. However, Games Workshop is 1.53 times more volatile than Vodafone Group PLC. It trades about 0.13 of its potential returns per unit of risk. Vodafone Group PLC is currently generating about -0.12 per unit of risk. If you would invest  1,093,208  in Games Workshop Group on October 7, 2024 and sell it today you would earn a total of  230,792  from holding Games Workshop Group or generate 21.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Games Workshop Group  vs.  Vodafone Group PLC

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 rather uncertain technical and fundamental indicators, Games Workshop exhibited solid returns over the last few months and may actually be approaching a breakup point.

Vodafone Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vodafone Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Games Workshop and Vodafone Group

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

The idea behind Games Workshop Group and Vodafone Group PLC 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.