Correlation Between TT Electronics and Games Workshop

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

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

Diversification Opportunities for TT Electronics and Games Workshop

0.2

Correlation Coefficient

TT Electronics  Games Workshop

Modest diversification

The 3 months correlation between 7TT and Games is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding TT Electronics PLC 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 TT Electronics 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 TT Electronics PLC 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 TT Electronics i.e., TT Electronics and Games Workshop go up and down completely randomly.

Pair Corralation between TT Electronics and Games Workshop

Assuming the 90 days trading horizon TT Electronics PLC is expected to generate 0.94 times more return on investment than Games Workshop. However, TT Electronics PLC is 1.06 times less risky than Games Workshop. It trades about 0.42 of its potential returns per unit of risk. Games Workshop Group is currently generating about -0.02 per unit of risk. If you would invest  169.00  in TT Electronics PLC on February 7, 2024 and sell it today you would earn a total of  33.00  from holding TT Electronics PLC or generate 19.53% return on investment over 90 days.

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

TT Electronics PLC  vs.  Games Workshop Group

TT Electronics PLC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TT Electronics PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, TT Electronics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Games Workshop Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Games Workshop Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Games Workshop is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with TT Electronics and Games Workshop

The main advantage of trading using opposite TT Electronics and Games Workshop positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TT Electronics 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 TT Electronics PLC 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.