Correlation Between Food Life and GAMESTOP
Can any of the company-specific risk be diversified away by investing in both Food Life and GAMESTOP 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 Food Life and GAMESTOP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Food Life Companies and GAMESTOP, you can compare the effects of market volatilities on Food Life and GAMESTOP 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 Food Life with a short position of GAMESTOP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Food Life and GAMESTOP.
Diversification Opportunities for Food Life and GAMESTOP
Poor diversification
The 3 months correlation between Food and GAMESTOP is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Food Life Companies and GAMESTOP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAMESTOP and Food Life 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 Food Life Companies are associated (or correlated) with GAMESTOP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAMESTOP has no effect on the direction of Food Life i.e., Food Life and GAMESTOP go up and down completely randomly.
Pair Corralation between Food Life and GAMESTOP
Assuming the 90 days horizon Food Life is expected to generate 10.19 times less return on investment than GAMESTOP. But when comparing it to its historical volatility, Food Life Companies is 3.59 times less risky than GAMESTOP. It trades about 0.02 of its potential returns per unit of risk. GAMESTOP is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,005 in GAMESTOP on August 31, 2024 and sell it today you would earn a total of 697.00 from holding GAMESTOP or generate 34.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Food Life Companies vs. GAMESTOP
Performance |
| Timeline |
| Food Life Companies |
| GAMESTOP |
Food Life and GAMESTOP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Food Life and GAMESTOP
The main advantage of trading using opposite Food Life and GAMESTOP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Food Life position performs unexpectedly, GAMESTOP 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 GAMESTOP will offset losses from the drop in GAMESTOP's long position.| Food Life vs. McDonalds | Food Life vs. Starbucks | Food Life vs. Compass Group PLC | Food Life vs. Yum Brands |
| GAMESTOP vs. SIVERS SEMICONDUCTORS AB | GAMESTOP vs. Darden Restaurants | GAMESTOP vs. Reliance Steel Aluminum | GAMESTOP vs. Q2M Managementberatung AG |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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