Correlation Between CD Projekt and Gravity

Can any of the company-specific risk be diversified away by investing in both CD Projekt and Gravity 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 Gravity 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 Gravity Co, you can compare the effects of market volatilities on CD Projekt and Gravity 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 Gravity. Check out your portfolio center. Please also check ongoing floating volatility patterns of CD Projekt and Gravity.

Diversification Opportunities for CD Projekt and Gravity

-0.42

Correlation Coefficient

CD Projekt  Gravity

Very good diversification

The 3 months correlation between OTGLY and Gravity is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding CD Projekt SA and Gravity Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gravity 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 Gravity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gravity has no effect on the direction of CD Projekt i.e., CD Projekt and Gravity go up and down completely randomly.

Pair Corralation between CD Projekt and Gravity

Assuming the 90 days horizon CD Projekt SA is expected to generate 1.45 times more return on investment than Gravity. However, CD Projekt is 1.45 times more volatile than Gravity Co. It trades about 0.12 of its potential returns per unit of risk. Gravity Co is currently generating about -0.02 per unit of risk. If you would invest  1,162  in CD Projekt SA on December 29, 2024 and sell it today you would earn a total of  201.00  from holding CD Projekt SA or generate 17.3% return on investment over 90 days.

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

CD Projekt SA  vs.  Gravity Co

CD Projekt SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CD Projekt SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile essential indicators, CD Projekt showed solid returns over the last few months and may actually be approaching a breakup point.

Gravity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gravity Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Gravity is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CD Projekt and Gravity

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

The idea behind CD Projekt SA and Gravity Co 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.