Correlation Between MW Trade and CD PROJEKT

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

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

Diversification Opportunities for MW Trade and CD PROJEKT

0.77

Correlation Coefficient

MW Trade  CD PROJEKT

Poor diversification

The 3 months correlation between MWT and CDR is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding MW Trade SA and CD PROJEKT SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CD PROJEKT SA and MW Trade 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 MW Trade SA are associated (or correlated) with CD PROJEKT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CD PROJEKT SA has no effect on the direction of MW Trade i.e., MW Trade and CD PROJEKT go up and down completely randomly.

Pair Corralation between MW Trade and CD PROJEKT

Assuming the 90 days trading horizon MW Trade SA is expected to under-perform the CD PROJEKT. But the stock apears to be less risky and, when comparing its historical volatility, MW Trade SA is 1.26 times less risky than CD PROJEKT. The stock trades about -0.38 of its potential returns per unit of risk. The CD PROJEKT SA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  16,095  in CD PROJEKT SA on August 31, 2024 and sell it today you would earn a total of  385.00  from holding CD PROJEKT SA or generate 2.39% return on investment over 90 days.

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

MW Trade SA  vs.  CD PROJEKT SA

MW Trade SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MW Trade SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

CD PROJEKT SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CD PROJEKT SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with MW Trade and CD PROJEKT

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

The idea behind MW Trade SA and CD PROJEKT 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.