Correlation Between Gaming Factory and MW Trade

Can any of the company-specific risk be diversified away by investing in both Gaming Factory and MW Trade 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 Gaming Factory and MW Trade into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gaming Factory SA and MW Trade SA, you can compare the effects of market volatilities on Gaming Factory and MW Trade 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 Gaming Factory with a short position of MW Trade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gaming Factory and MW Trade.

Diversification Opportunities for Gaming Factory and MW Trade

0.88

Correlation Coefficient

Gaming Factory  MW Trade

Very poor diversification

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

Pair Corralation between Gaming Factory and MW Trade

Assuming the 90 days trading horizon Gaming Factory SA is expected to generate 1.48 times more return on investment than MW Trade. However, Gaming Factory is 1.48 times more volatile than MW Trade SA. It trades about -0.1 of its potential returns per unit of risk. MW Trade SA is currently generating about -0.15 per unit of risk. If you would invest  1,255  in Gaming Factory SA on September 9, 2024 and sell it today you would lose (535.00) from holding Gaming Factory SA or give up 42.63% of portfolio value over 90 days.

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

Gaming Factory SA  vs.  MW Trade SA

Gaming Factory SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gaming Factory SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

MW Trade SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MW Trade SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Gaming Factory and MW Trade

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

The idea behind Gaming Factory SA and MW Trade SA 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.