Correlation Between Games Workshop and AJ Bell

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

Diversification Opportunities for Games Workshop and AJ Bell

-0.09

Correlation Coefficient

Games Workshop  AJ Bell

Good diversification

The 3 months correlation between Games and AJB is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Games Workshop Group and AJ Bell plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AJ Bell 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 AJ Bell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AJ Bell plc has no effect on the direction of Games Workshop i.e., Games Workshop and AJ Bell go up and down completely randomly.

Pair Corralation between Games Workshop and AJ Bell

Assuming the 90 days trading horizon Games Workshop Group is expected to generate 1.01 times more return on investment than AJ Bell. However, Games Workshop is 1.01 times more volatile than AJ Bell plc. It trades about 0.09 of its potential returns per unit of risk. AJ Bell plc is currently generating about -0.05 per unit of risk. If you would invest  1,284,791  in Games Workshop Group on December 29, 2024 and sell it today you would earn a total of  115,209  from holding Games Workshop Group or generate 8.97% return on investment over 90 days.

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

Games Workshop Group  vs.  AJ Bell plc

Games Workshop Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Games Workshop Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Games Workshop may actually be approaching a critical reversion point that can send shares even higher in April 2025.

AJ Bell plc

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Games Workshop and AJ Bell

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

The idea behind Games Workshop Group and AJ Bell 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.