Correlation Between Games Workshop and Premier Foods

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

Diversification Opportunities for Games Workshop and Premier Foods

GamesPremierDiversified AwayGamesPremierDiversified Away100%
0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between Games and Premier is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Games Workshop Group and Premier Foods PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Foods PLC 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 Premier Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Foods PLC has no effect on the direction of Games Workshop i.e., Games Workshop and Premier Foods go up and down completely randomly.

Pair Corralation between Games Workshop and Premier Foods

Assuming the 90 days trading horizon Games Workshop Group is expected to generate 2.21 times more return on investment than Premier Foods. However, Games Workshop is 2.21 times more volatile than Premier Foods PLC. It trades about 0.14 of its potential returns per unit of risk. Premier Foods PLC is currently generating about 0.07 per unit of risk. If you would invest  1,050,512  in Games Workshop Group on September 24, 2024 and sell it today you would earn a total of  249,488  from holding Games Workshop Group or generate 23.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Games Workshop Group  vs.  Premier Foods PLC

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec 5101520253035
JavaScript chart by amCharts 3.21.15GAW PFD
       Timeline  
Games Workshop Group 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Games Workshop Group are ranked lower than 11 (%) 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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec10,50011,00011,50012,00012,50013,00013,50014,00014,500
Premier Foods PLC 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Premier Foods PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Premier Foods is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec180185190195

Games Workshop and Premier Foods Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-7.53-5.64-3.75-1.860.03392.034.076.18.14 0.050.100.150.200.250.30
JavaScript chart by amCharts 3.21.15GAW PFD
       Returns  

Pair Trading with Games Workshop and Premier Foods

The main advantage of trading using opposite Games Workshop and Premier Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Games Workshop position performs unexpectedly, Premier Foods 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 Premier Foods will offset losses from the drop in Premier Foods' long position.
The idea behind Games Workshop Group and Premier Foods PLC 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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