Correlation Between CD Projekt and Capcom Co

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Can any of the company-specific risk be diversified away by investing in both CD Projekt and Capcom Co 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 CD Projekt and Capcom Co into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CD Projekt SA and Capcom Co Ltd, you can compare the effects of market volatilities on CD Projekt and Capcom Co 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 CD Projekt with a short position of Capcom Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of CD Projekt and Capcom Co.

Diversification Opportunities for CD Projekt and Capcom Co

0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between OTGLY and Capcom is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding CD Projekt SA and Capcom Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capcom Co and CD Projekt 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 CD Projekt SA are associated (or correlated) with Capcom Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capcom Co has no effect on the direction of CD Projekt i.e., CD Projekt and Capcom Co go up and down completely randomly.

Pair Corralation between CD Projekt and Capcom Co

Assuming the 90 days horizon CD Projekt SA is expected to generate 1.77 times more return on investment than Capcom Co. However, CD Projekt is 1.77 times more volatile than Capcom Co Ltd. It trades about 0.3 of its potential returns per unit of risk. Capcom Co Ltd is currently generating about 0.24 per unit of risk. If you would invest  871.00  in CD Projekt SA on April 23, 2024 and sell it today you would earn a total of  120.00  from holding CD Projekt SA or generate 13.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

CD Projekt SA  vs.  Capcom Co Ltd

 Performance 
       Timeline  
CD Projekt SA 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in CD Projekt SA are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile essential indicators, CD Projekt showed solid returns over the last few months and may actually be approaching a breakup point.
Capcom Co 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Capcom Co Ltd are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting technical and fundamental indicators, Capcom Co showed solid returns over the last few months and may actually be approaching a breakup point.

CD Projekt and Capcom Co Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CD Projekt and Capcom Co

The main advantage of trading using opposite CD Projekt and Capcom Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CD Projekt position performs unexpectedly, Capcom Co 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 Capcom Co will offset losses from the drop in Capcom Co's long position.
The idea behind CD Projekt SA and Capcom Co Ltd 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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