Correlation Between CD Projekt and Papaya Growth

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

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

Diversification Opportunities for CD Projekt and Papaya Growth

-0.49

Correlation Coefficient

CD Projekt  Papaya Growth

Very good diversification

The 3 months correlation between OTGLF and Papaya is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding CD Projekt SA and Papaya Growth Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Papaya Growth Opportunity and CD Projekt 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 CD Projekt SA are associated (or correlated) with Papaya Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Papaya Growth Opportunity has no effect on the direction of CD Projekt i.e., CD Projekt and Papaya Growth go up and down completely randomly.

Pair Corralation between CD Projekt and Papaya Growth

Assuming the 90 days horizon CD Projekt SA is expected to generate 44.29 times more return on investment than Papaya Growth. However, CD Projekt is 44.29 times more volatile than Papaya Growth Opportunity. It trades about 0.02 of its potential returns per unit of risk. Papaya Growth Opportunity is currently generating about 0.14 per unit of risk. If you would invest  4,500  in CD Projekt SA on September 13, 2024 and sell it today you would earn a total of  0.00  from holding CD Projekt SA or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

CD Projekt SA  vs.  Papaya Growth Opportunity

CD Projekt SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CD Projekt SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, CD Projekt may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Papaya Growth Opportunity

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Papaya Growth Opportunity are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Papaya Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CD Projekt and Papaya Growth

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

The idea behind CD Projekt SA and Papaya Growth Opportunity 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.