Correlation Between Movie Games and Globe Trade

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

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

Diversification Opportunities for Movie Games and Globe Trade

-0.05

Correlation Coefficient

Movie Games  Globe Trade

Good diversification

The 3 months correlation between Movie and Globe is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Movie Games SA and Globe Trade Centre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globe Trade Centre and Movie Games 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 Movie Games SA are associated (or correlated) with Globe Trade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globe Trade Centre has no effect on the direction of Movie Games i.e., Movie Games and Globe Trade go up and down completely randomly.

Pair Corralation between Movie Games and Globe Trade

Assuming the 90 days trading horizon Movie Games SA is expected to generate 2.77 times more return on investment than Globe Trade. However, Movie Games is 2.77 times more volatile than Globe Trade Centre. It trades about 0.02 of its potential returns per unit of risk. Globe Trade Centre is currently generating about -0.01 per unit of risk. If you would invest  1,720  in Movie Games SA on December 2, 2024 and sell it today you would earn a total of  10.00  from holding Movie Games SA or generate 0.58% return on investment over 90 days.

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

Movie Games SA  vs.  Globe Trade Centre

Movie Games SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Movie Games SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Movie Games may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Globe Trade Centre

Risk-Adjusted Performance

Very Weak

Over the last 90 days Globe Trade Centre has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Globe Trade is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Movie Games and Globe Trade

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

The idea behind Movie Games SA and Globe Trade Centre 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.