Correlation Between PENN NATL and Games Workshop

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

By analyzing existing cross correlation between PENN NATL GAMING and Games Workshop Group, you can compare the effects of market volatilities on PENN NATL and Games Workshop 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 PENN NATL with a short position of Games Workshop. Check out your portfolio center. Please also check ongoing floating volatility patterns of PENN NATL and Games Workshop.

Diversification Opportunities for PENN NATL and Games Workshop

0.69

Correlation Coefficient

PENN NATL  Games Workshop

Poor diversification

The 3 months correlation between PENN and Games is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and Games Workshop Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Games Workshop Group and PENN NATL 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 PENN NATL GAMING are associated (or correlated) with Games Workshop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Games Workshop Group has no effect on the direction of PENN NATL i.e., PENN NATL and Games Workshop go up and down completely randomly.

Pair Corralation between PENN NATL and Games Workshop

Assuming the 90 days trading horizon PENN NATL is expected to generate 2.33 times less return on investment than Games Workshop. But when comparing it to its historical volatility, PENN NATL GAMING is 1.11 times less risky than Games Workshop. It trades about 0.06 of its potential returns per unit of risk. Games Workshop Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  12,973  in Games Workshop Group on October 7, 2024 and sell it today you would earn a total of  3,027  from holding Games Workshop Group or generate 23.33% return on investment over 90 days.

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

PENN NATL GAMING  vs.  Games Workshop Group

PENN NATL GAMING

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PENN NATL GAMING are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, PENN NATL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Games Workshop Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Games Workshop Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Games Workshop unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PENN NATL and Games Workshop

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

The idea behind PENN NATL GAMING and Games Workshop Group 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.