Correlation Between Light Wonder and Neogames

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

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

Diversification Opportunities for Light Wonder and Neogames

0.08

Correlation Coefficient

Light Wonder  Neogames

Significant diversification

The 3 months correlation between Light and Neogames is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Light Wonder and Neogames SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neogames SA and Light Wonder 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 Light Wonder are associated (or correlated) with Neogames. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neogames SA has no effect on the direction of Light Wonder i.e., Light Wonder and Neogames go up and down completely randomly.

Pair Corralation between Light Wonder and Neogames

Considering the 90-day investment horizon Light Wonder is expected to generate 9.41 times less return on investment than Neogames. But when comparing it to its historical volatility, Light Wonder is 5.73 times less risky than Neogames. It trades about 0.06 of its potential returns per unit of risk. Neogames SA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,445  in Neogames SA on October 5, 2024 and sell it today you would earn a total of  1,264  from holding Neogames SA or generate 87.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	20.0%
Values	Daily Returns

Light Wonder  vs.  Neogames SA

Light Wonder

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Light Wonder has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Neogames SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Neogames SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Neogames is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Light Wonder and Neogames

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

The idea behind Light Wonder and Neogames 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.