Correlation Between Occidental and Games Workshop

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

By analyzing existing cross correlation between Occidental Petroleum 44 and Games Workshop Group, you can compare the effects of market volatilities on Occidental 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 Occidental with a short position of Games Workshop. Check out your portfolio center. Please also check ongoing floating volatility patterns of Occidental and Games Workshop.

Diversification Opportunities for Occidental and Games Workshop

0.31

Correlation Coefficient

Occidental  Games Workshop

Weak diversification

The 3 months correlation between Occidental and Games is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Occidental Petroleum 44 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 Occidental 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 Occidental Petroleum 44 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 Occidental i.e., Occidental and Games Workshop go up and down completely randomly.

Pair Corralation between Occidental and Games Workshop

Assuming the 90 days trading horizon Occidental is expected to generate 1.01 times less return on investment than Games Workshop. But when comparing it to its historical volatility, Occidental Petroleum 44 is 1.28 times less risky than Games Workshop. It trades about 0.12 of its potential returns per unit of risk. Games Workshop Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  16,800  in Games Workshop Group on December 26, 2024 and sell it today you would earn a total of  2,000  from holding Games Workshop Group or generate 11.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.49%
Values	Daily Returns

Occidental Petroleum 44  vs.  Games Workshop Group

Occidental Petroleum

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Occidental Petroleum 44 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Occidental sustained solid returns over the last few months and may actually be approaching a breakup point.

Games Workshop Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Games Workshop Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal forward-looking signals, Games Workshop reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Occidental and Games Workshop

The main advantage of trading using opposite Occidental and Games Workshop positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Occidental 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 Occidental Petroleum 44 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.