Correlation Between Globalfoundries and Games Workshop

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

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

Diversification Opportunities for Globalfoundries and Games Workshop

0.53

Correlation Coefficient

Globalfoundries  Games Workshop

Very weak diversification

The 3 months correlation between Globalfoundries and Games is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Globalfoundries 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 Globalfoundries 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 Globalfoundries 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 Globalfoundries i.e., Globalfoundries and Games Workshop go up and down completely randomly.

Pair Corralation between Globalfoundries and Games Workshop

Considering the 90-day investment horizon Globalfoundries is expected to under-perform the Games Workshop. But the stock apears to be less risky and, when comparing its historical volatility, Globalfoundries is 1.36 times less risky than Games Workshop. The stock trades about -0.02 of its potential returns per unit of risk. The Games Workshop Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  11,305  in Games Workshop Group on October 23, 2024 and sell it today you would earn a total of  4,299  from holding Games Workshop Group or generate 38.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	81.58%
Values	Daily Returns

Globalfoundries  vs.  Games Workshop Group

Globalfoundries

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Globalfoundries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Globalfoundries unveiled solid returns over the last few months and may actually be approaching a breakup point.

Games Workshop Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Games Workshop Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, Games Workshop is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Globalfoundries and Games Workshop

The main advantage of trading using opposite Globalfoundries and Games Workshop positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Globalfoundries 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 Globalfoundries 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.