Correlation Between European Metals and Games Workshop

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

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

Diversification Opportunities for European Metals and Games Workshop

-0.43

Correlation Coefficient

European Metals  Games Workshop

Very good diversification

The 3 months correlation between European and Games is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding European Metals Holdings 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 European Metals 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 European Metals Holdings 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 European Metals i.e., European Metals and Games Workshop go up and down completely randomly.

Pair Corralation between European Metals and Games Workshop

Assuming the 90 days trading horizon European Metals Holdings is expected to under-perform the Games Workshop. In addition to that, European Metals is 1.45 times more volatile than Games Workshop Group. It trades about -0.09 of its total potential returns per unit of risk. Games Workshop Group is currently generating about 0.19 per unit of volatility. If you would invest  1,042,569  in Games Workshop Group on September 17, 2024 and sell it today you would earn a total of  349,431  from holding Games Workshop Group or generate 33.52% return on investment over 90 days.

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

European Metals Holdings  vs.  Games Workshop Group

European Metals Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days European Metals Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Games Workshop Group

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Games Workshop Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Games Workshop exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with European Metals and Games Workshop

The main advantage of trading using opposite European Metals and Games Workshop positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Metals 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 European Metals Holdings 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..