Correlation Between Games Workshop and Gamehost

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

Diversification Opportunities for Games Workshop and Gamehost

-0.47

Correlation Coefficient

Games Workshop  Gamehost

Very good diversification

The 3 months correlation between Games and Gamehost is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Games Workshop Group and Gamehost in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamehost 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 Gamehost. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamehost has no effect on the direction of Games Workshop i.e., Games Workshop and Gamehost go up and down completely randomly.

Pair Corralation between Games Workshop and Gamehost

Assuming the 90 days horizon Games Workshop Group is expected to generate 0.87 times more return on investment than Gamehost. However, Games Workshop Group is 1.14 times less risky than Gamehost. It trades about 0.11 of its potential returns per unit of risk. Gamehost is currently generating about -0.21 per unit of risk. If you would invest  15,400  in Games Workshop Group on October 11, 2024 and sell it today you would earn a total of  1,960  from holding Games Workshop Group or generate 12.73% return on investment over 90 days.

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

Games Workshop Group  vs.  Gamehost

Games Workshop Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Games Workshop Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal forward-looking signals, Games Workshop reported solid returns over the last few months and may actually be approaching a breakup point.

Gamehost

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gamehost has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Gamehost is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Games Workshop and Gamehost

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

The idea behind Games Workshop Group and Gamehost 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.