Correlation Between Games Workshop and Empire Metals

Can any of the company-specific risk be diversified away by investing in both Games Workshop and Empire Metals 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 Empire Metals 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 Empire Metals Limited, you can compare the effects of market volatilities on Games Workshop and Empire Metals 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 Empire Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Games Workshop and Empire Metals.

Diversification Opportunities for Games Workshop and Empire Metals

-0.62

Correlation Coefficient

Games Workshop  Empire Metals

Excellent diversification

The 3 months correlation between Games and Empire is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Games Workshop Group and Empire Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empire Metals Limited 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 Empire Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empire Metals Limited has no effect on the direction of Games Workshop i.e., Games Workshop and Empire Metals go up and down completely randomly.

Pair Corralation between Games Workshop and Empire Metals

Assuming the 90 days trading horizon Games Workshop Group is expected to generate 0.81 times more return on investment than Empire Metals. However, Games Workshop Group is 1.23 times less risky than Empire Metals. It trades about 0.16 of its potential returns per unit of risk. Empire Metals Limited is currently generating about -0.08 per unit of risk. If you would invest  1,069,378  in Games Workshop Group on September 19, 2024 and sell it today you would earn a total of  285,622  from holding Games Workshop Group or generate 26.71% return on investment over 90 days.

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

Games Workshop Group  vs.  Empire Metals Limited

Games Workshop Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Games Workshop Group are ranked lower than 12 (%) 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.

Empire Metals Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Empire Metals Limited 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.

Pair Trading with Games Workshop and Empire Metals

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

The idea behind Games Workshop Group and Empire Metals Limited 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .