Correlation Between Gaming Realms and Axfood AB

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

By analyzing existing cross correlation between Gaming Realms plc and Axfood AB, you can compare the effects of market volatilities on Gaming Realms and Axfood AB 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 Gaming Realms with a short position of Axfood AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gaming Realms and Axfood AB.

Diversification Opportunities for Gaming Realms and Axfood AB

0.09

Correlation Coefficient

Gaming Realms  Axfood AB

Significant diversification

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

Pair Corralation between Gaming Realms and Axfood AB

Assuming the 90 days trading horizon Gaming Realms plc is expected to generate 1.72 times more return on investment than Axfood AB. However, Gaming Realms is 1.72 times more volatile than Axfood AB. It trades about -0.05 of its potential returns per unit of risk. Axfood AB is currently generating about -0.19 per unit of risk. If you would invest  3,990  in Gaming Realms plc on September 19, 2024 and sell it today you would lose (390.00) from holding Gaming Realms plc or give up 9.77% of portfolio value over 90 days.

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

Gaming Realms plc  vs.  Axfood AB

Gaming Realms plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gaming Realms plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Axfood AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Axfood AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Gaming Realms and Axfood AB

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

The idea behind Gaming Realms plc and Axfood AB 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.