Correlation Between Games Workshop and NRG Energy

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

Diversification Opportunities for Games Workshop and NRG Energy

0.37

Correlation Coefficient

Games Workshop  NRG Energy

Weak diversification

The 3 months correlation between Games and NRG is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Games Workshop Group and NRG Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRG Energy 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 NRG Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NRG Energy has no effect on the direction of Games Workshop i.e., Games Workshop and NRG Energy go up and down completely randomly.

Pair Corralation between Games Workshop and NRG Energy

Assuming the 90 days horizon Games Workshop Group is expected to under-perform the NRG Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Games Workshop Group is 1.22 times less risky than NRG Energy. The pink sheet trades about -0.23 of its potential returns per unit of risk. The NRG Energy is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  9,607  in NRG Energy on October 10, 2024 and sell it today you would earn a total of  66.00  from holding NRG Energy or generate 0.69% return on investment over 90 days.

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

Games Workshop Group  vs.  NRG Energy

Games Workshop Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Games Workshop Group are ranked lower than 8 (%) 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.

NRG Energy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NRG Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, NRG Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Games Workshop and NRG Energy

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

The idea behind Games Workshop Group and NRG Energy 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.