Correlation Between GMS and GameStop Corp
Can any of the company-specific risk be diversified away by investing in both GMS and GameStop Corp 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 GMS and GameStop Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and GameStop Corp, you can compare the effects of market volatilities on GMS and GameStop Corp 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 GMS with a short position of GameStop Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and GameStop Corp.
Diversification Opportunities for GMS and GameStop Corp
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GMS and GameStop is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and GameStop Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GameStop Corp and GMS 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 GMS Inc are associated (or correlated) with GameStop Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GameStop Corp has no effect on the direction of GMS i.e., GMS and GameStop Corp go up and down completely randomly.
Pair Corralation between GMS and GameStop Corp
Considering the 90-day investment horizon GMS is expected to generate 1.88 times less return on investment than GameStop Corp. But when comparing it to its historical volatility, GMS Inc is 1.96 times less risky than GameStop Corp. It trades about 0.28 of its potential returns per unit of risk. GameStop Corp is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 2,233 in GameStop Corp on September 5, 2024 and sell it today you would earn a total of 511.00 from holding GameStop Corp or generate 22.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GMS Inc vs. GameStop Corp
Performance |
| Timeline |
| GMS Inc |
| GameStop Corp |
GMS and GameStop Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMS and GameStop Corp
The main advantage of trading using opposite GMS and GameStop Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, GameStop Corp 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 Corp will offset losses from the drop in GameStop Corp's long position.| GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
| GameStop Corp vs. RH | GameStop Corp vs. Dicks Sporting Goods | GameStop Corp vs. Best Buy Co | GameStop Corp vs. AutoZone |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
Other Complementary Tools
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume |