Correlation Between Ultimate Games and Live Motion

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

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

Diversification Opportunities for Ultimate Games and Live Motion

0.15

Correlation Coefficient

Ultimate Games  Live Motion

Average diversification

The 3 months correlation between Ultimate and Live is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ultimate Games SA and Live Motion Games in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Live Motion Games and Ultimate 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 Ultimate Games SA are associated (or correlated) with Live Motion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Live Motion Games has no effect on the direction of Ultimate Games i.e., Ultimate Games and Live Motion go up and down completely randomly.

Pair Corralation between Ultimate Games and Live Motion

Assuming the 90 days trading horizon Ultimate Games is expected to generate 1.51 times less return on investment than Live Motion. But when comparing it to its historical volatility, Ultimate Games SA is 1.78 times less risky than Live Motion. It trades about 0.08 of its potential returns per unit of risk. Live Motion Games is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  86.00  in Live Motion Games on December 30, 2024 and sell it today you would earn a total of  12.00  from holding Live Motion Games or generate 13.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Ultimate Games SA  vs.  Live Motion Games

Ultimate Games SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ultimate Games SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Ultimate Games reported solid returns over the last few months and may actually be approaching a breakup point.

Live Motion Games

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Live Motion Games are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Live Motion reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ultimate Games and Live Motion

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

The idea behind Ultimate Games SA and Live Motion Games 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.