Correlation Between Soft World and Chinese Gamer
Can any of the company-specific risk be diversified away by investing in both Soft World and Chinese Gamer 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 Soft World and Chinese Gamer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Soft World International and Chinese Gamer International, you can compare the effects of market volatilities on Soft World and Chinese Gamer 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 Soft World with a short position of Chinese Gamer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Soft World and Chinese Gamer.
Diversification Opportunities for Soft World and Chinese Gamer
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Soft and Chinese is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Soft World International and Chinese Gamer International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chinese Gamer Intern and Soft World 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 Soft World International are associated (or correlated) with Chinese Gamer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chinese Gamer Intern has no effect on the direction of Soft World i.e., Soft World and Chinese Gamer go up and down completely randomly.
Pair Corralation between Soft World and Chinese Gamer
Assuming the 90 days trading horizon Soft World International is expected to under-perform the Chinese Gamer. In addition to that, Soft World is 1.08 times more volatile than Chinese Gamer International. It trades about -0.03 of its total potential returns per unit of risk. Chinese Gamer International is currently generating about -0.03 per unit of volatility. If you would invest 4,270 in Chinese Gamer International on November 4, 2024 and sell it today you would lose (30.00) from holding Chinese Gamer International or give up 0.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Soft World International vs. Chinese Gamer International
Performance |
| Timeline |
| Soft World International |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Chinese Gamer Intern |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Soft World and Chinese Gamer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Soft World and Chinese Gamer
The main advantage of trading using opposite Soft World and Chinese Gamer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Soft World position performs unexpectedly, Chinese Gamer 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 Chinese Gamer will offset losses from the drop in Chinese Gamer's long position.The idea behind Soft World International and Chinese Gamer International 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.Check out your portfolio center.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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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