Can any of the company-specific risk be diversified away by investing in both CD Projekt and Ubisoft Entertainment 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 CD Projekt and Ubisoft Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CD Projekt SA and Ubisoft Entertainment, you can compare the effects of market volatilities on CD Projekt and Ubisoft Entertainment 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 CD Projekt with a short position of Ubisoft Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of CD Projekt and Ubisoft Entertainment.
Diversification Opportunities for CD Projekt and Ubisoft Entertainment
The 3 months correlation between OTGLY and Ubisoft is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding CD Projekt SA and Ubisoft Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ubisoft Entertainment and CD Projekt 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 CD Projekt SA are associated (or correlated) with Ubisoft Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ubisoft Entertainment has no effect on the direction of CD Projekt i.e., CD Projekt and Ubisoft Entertainment go up and down completely randomly.
Pair Corralation between CD Projekt and Ubisoft Entertainment
Assuming the 90 days horizon CD Projekt SA is expected to generate 0.75 times more return on investment than Ubisoft Entertainment. However, CD Projekt SA is 1.34 times less risky than Ubisoft Entertainment. It trades about 0.15 of its potential returns per unit of risk. Ubisoft Entertainment is currently generating about 0.07 per unit of risk. If you would invest 766.00 in CD Projekt SA on March 6, 2024 and sell it today you would earn a total of 69.00 from holding CD Projekt SA or generate 9.01% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in CD Projekt SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent essential indicators, CD Projekt showed solid returns over the last few months and may actually be approaching a breakup point.
Compared to the overall equity markets, risk-adjusted returns on investments in Ubisoft Entertainment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Ubisoft Entertainment reported solid returns over the last few months and may actually be approaching a breakup point.