Correlation Between Gaming and CHINA CH

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

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

Diversification Opportunities for Gaming and CHINA CH

-0.41

Correlation Coefficient

Gaming  CHINA CH

Very good diversification

The 3 months correlation between Gaming and CHINA is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Gaming and Leisure and CHINA CH VENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA CH VENT and Gaming 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 and Leisure are associated (or correlated) with CHINA CH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA CH VENT has no effect on the direction of Gaming i.e., Gaming and CHINA CH go up and down completely randomly.

Pair Corralation between Gaming and CHINA CH

Assuming the 90 days horizon Gaming and Leisure is expected to under-perform the CHINA CH. But the stock apears to be less risky and, when comparing its historical volatility, Gaming and Leisure is 3.6 times less risky than CHINA CH. The stock trades about -0.02 of its potential returns per unit of risk. The CHINA CH VENT is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  88.00  in CHINA CH VENT on April 20, 2025 and sell it today you would earn a total of  14.00  from holding CHINA CH VENT or generate 15.91% return on investment over 90 days.

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

Gaming and Leisure  vs.  CHINA CH VENT

Gaming and Leisure

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gaming and Leisure has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Gaming is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

CHINA CH VENT

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA CH VENT are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CHINA CH reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gaming and CHINA CH

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

The idea behind Gaming and Leisure and CHINA CH VENT 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.