Correlation Between Live Motion and Gaming Factory

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

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

Diversification Opportunities for Live Motion and Gaming Factory

0.28

Correlation Coefficient

Live Motion  Gaming Factory

Modest diversification

The 3 months correlation between Live and Gaming is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Live Motion Games and Gaming Factory SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaming Factory SA and Live Motion 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 Live Motion Games are associated (or correlated) with Gaming Factory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaming Factory SA has no effect on the direction of Live Motion i.e., Live Motion and Gaming Factory go up and down completely randomly.

Pair Corralation between Live Motion and Gaming Factory

Assuming the 90 days trading horizon Live Motion is expected to generate 2.07 times less return on investment than Gaming Factory. In addition to that, Live Motion is 1.51 times more volatile than Gaming Factory SA. It trades about 0.06 of its total potential returns per unit of risk. Gaming Factory SA is currently generating about 0.17 per unit of volatility. If you would invest  700.00  in Gaming Factory SA on December 27, 2024 and sell it today you would earn a total of  320.00  from holding Gaming Factory SA or generate 45.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Live Motion Games  vs.  Gaming Factory SA

Live Motion Games

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Live Motion Games are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Live Motion reported solid returns over the last few months and may actually be approaching a breakup point.

Gaming Factory SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gaming Factory SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Gaming Factory reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Live Motion and Gaming Factory

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

The idea behind Live Motion Games and Gaming Factory SA 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.