Correlation Between GameStop Corp and Cadence Design
Can any of the company-specific risk be diversified away by investing in both GameStop Corp and Cadence Design 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 GameStop Corp and Cadence Design into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GameStop Corp and Cadence Design Systems, you can compare the effects of market volatilities on GameStop Corp and Cadence Design 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 GameStop Corp with a short position of Cadence Design. Check out your portfolio center. Please also check ongoing floating volatility patterns of GameStop Corp and Cadence Design.
Diversification Opportunities for GameStop Corp and Cadence Design
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GameStop and Cadence is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding GameStop Corp and Cadence Design Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadence Design Systems and GameStop Corp 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 GameStop Corp are associated (or correlated) with Cadence Design. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadence Design Systems has no effect on the direction of GameStop Corp i.e., GameStop Corp and Cadence Design go up and down completely randomly.
Pair Corralation between GameStop Corp and Cadence Design
Considering the 90-day investment horizon GameStop Corp is expected to generate 4.65 times more return on investment than Cadence Design. However, GameStop Corp is 4.65 times more volatile than Cadence Design Systems. It trades about 0.11 of its potential returns per unit of risk. Cadence Design Systems is currently generating about 0.01 per unit of risk. If you would invest 1,006 in GameStop Corp on October 12, 2024 and sell it today you would earn a total of 2,290 from holding GameStop Corp or generate 227.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
GameStop Corp vs. Cadence Design Systems
Performance |
| Timeline |
| GameStop Corp |
| Cadence Design Systems |
GameStop Corp and Cadence Design Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GameStop Corp and Cadence Design
The main advantage of trading using opposite GameStop Corp and Cadence Design positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GameStop Corp position performs unexpectedly, Cadence Design 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 Cadence Design will offset losses from the drop in Cadence Design's long position.| GameStop Corp vs. RH | GameStop Corp vs. Dicks Sporting Goods | GameStop Corp vs. Best Buy Co | GameStop Corp vs. AutoZone |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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