Correlation Between Games Workshop and GAMESTOP

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

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

Diversification Opportunities for Games Workshop and GAMESTOP

-0.31

Correlation Coefficient

Games Workshop  GAMESTOP

Very good diversification

The 3 months correlation between Games and GAMESTOP is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Games Workshop Group and GAMESTOP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAMESTOP and Games Workshop 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 Games Workshop Group are associated (or correlated) with GAMESTOP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAMESTOP has no effect on the direction of Games Workshop i.e., Games Workshop and GAMESTOP go up and down completely randomly.

Pair Corralation between Games Workshop and GAMESTOP

Assuming the 90 days trading horizon Games Workshop Group is expected to under-perform the GAMESTOP. But the stock apears to be less risky and, when comparing its historical volatility, Games Workshop Group is 5.48 times less risky than GAMESTOP. The stock trades about -0.02 of its potential returns per unit of risk. The GAMESTOP is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,005  in GAMESTOP on February 7, 2024 and sell it today you would earn a total of  565.00  from holding GAMESTOP or generate 56.22% return on investment over 90 days.

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

Games Workshop Group  vs.  GAMESTOP

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.

GAMESTOP

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GAMESTOP are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, GAMESTOP unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Games Workshop and GAMESTOP

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

The idea behind Games Workshop Group and GAMESTOP 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.