Correlation Between Games Workshop and Herald Investment

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

Diversification Opportunities for Games Workshop and Herald Investment

0.88

Correlation Coefficient

Games Workshop  Herald Investment

Very poor diversification

The 3 months correlation between Games and Herald is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Games Workshop Group and Herald Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herald Investment Trust 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 Herald Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herald Investment Trust has no effect on the direction of Games Workshop i.e., Games Workshop and Herald Investment go up and down completely randomly.

Pair Corralation between Games Workshop and Herald Investment

Assuming the 90 days trading horizon Games Workshop Group is expected to generate 2.64 times more return on investment than Herald Investment. However, Games Workshop is 2.64 times more volatile than Herald Investment Trust. It trades about 0.21 of its potential returns per unit of risk. Herald Investment Trust is currently generating about 0.23 per unit of risk. If you would invest  1,023,703  in Games Workshop Group on September 5, 2024 and sell it today you would earn a total of  391,297  from holding Games Workshop Group or generate 38.22% return on investment over 90 days.

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

Games Workshop Group  vs.  Herald Investment Trust

Games Workshop Group

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Games Workshop Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Games Workshop exhibited solid returns over the last few months and may actually be approaching a breakup point.

Herald Investment Trust

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Herald Investment Trust are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Herald Investment exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Games Workshop and Herald Investment

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

The idea behind Games Workshop Group and Herald Investment Trust 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.