Correlation Between Activision Blizzard and Gravity

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

By analyzing existing cross correlation between Activision Blizzard and Gravity Co, you can compare the effects of market volatilities on Activision Blizzard and Gravity 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 Activision Blizzard with a short position of Gravity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Activision Blizzard and Gravity.

Diversification Opportunities for Activision Blizzard and Gravity

0.47

Correlation Coefficient

Activision Blizzard  Gravity

Very weak diversification

The 3 months correlation between Activision and Gravity is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Activision Blizzard and Gravity Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gravity and Activision Blizzard 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 Activision Blizzard are associated (or correlated) with Gravity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gravity has no effect on the direction of Activision Blizzard i.e., Activision Blizzard and Gravity go up and down completely randomly.

Pair Corralation between Activision Blizzard and Gravity

Given the investment horizon of 90 days Activision Blizzard is expected to generate 0.68 times more return on investment than Gravity. However, Activision Blizzard is 1.48 times less risky than Gravity. It trades about 0.08 of its potential returns per unit of risk. Gravity Co is currently generating about 0.05 per unit of risk. If you would invest  7,655  in Activision Blizzard on September 20, 2024 and sell it today you would earn a total of  1,600  from holding Activision Blizzard or generate 20.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	28.43%
Values	Daily Returns

Activision Blizzard  vs.  Gravity Co

Activision Blizzard

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Activision Blizzard has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Activision Blizzard is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Gravity

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gravity Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Gravity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Activision Blizzard and Gravity

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

The idea behind Activision Blizzard and Gravity Co 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.