Correlation Between Lions Gate and Guild Esports

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

By analyzing existing cross correlation between Lions Gate Entertainment and Guild Esports Plc, you can compare the effects of market volatilities on Lions Gate and Guild Esports 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 Lions Gate with a short position of Guild Esports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lions Gate and Guild Esports.

Diversification Opportunities for Lions Gate and Guild Esports

-0.61

Correlation Coefficient

Lions Gate  Guild Esports

Excellent diversification

The 3 months correlation between Lions and Guild is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Lions Gate Entertainment and Guild Esports Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guild Esports Plc and Lions Gate 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 Lions Gate Entertainment are associated (or correlated) with Guild Esports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guild Esports Plc has no effect on the direction of Lions Gate i.e., Lions Gate and Guild Esports go up and down completely randomly.

Pair Corralation between Lions Gate and Guild Esports

Assuming the 90 days horizon Lions Gate Entertainment is expected to generate 0.3 times more return on investment than Guild Esports. However, Lions Gate Entertainment is 3.35 times less risky than Guild Esports. It trades about 0.1 of its potential returns per unit of risk. Guild Esports Plc is currently generating about -0.22 per unit of risk. If you would invest  1,016  in Lions Gate Entertainment on February 8, 2024 and sell it today you would earn a total of  82.00  from holding Lions Gate Entertainment or generate 8.07% return on investment over 90 days.

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

Lions Gate Entertainment  vs.  Guild Esports Plc

Lions Gate Entertainment

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lions Gate Entertainment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Lions Gate is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Guild Esports Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guild Esports Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Lions Gate and Guild Esports

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

The idea behind Lions Gate Entertainment and Guild Esports 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.