Correlation Between GAMESTOP and Airbus SE
Can any of the company-specific risk be diversified away by investing in both GAMESTOP and Airbus SE 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 and Airbus SE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GAMESTOP and Airbus SE, you can compare the effects of market volatilities on GAMESTOP and Airbus SE 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 with a short position of Airbus SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of GAMESTOP and Airbus SE.
Diversification Opportunities for GAMESTOP and Airbus SE
Poor diversification
The 3 months correlation between GAMESTOP and Airbus is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding GAMESTOP and Airbus SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airbus SE and GAMESTOP 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 are associated (or correlated) with Airbus SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airbus SE has no effect on the direction of GAMESTOP i.e., GAMESTOP and Airbus SE go up and down completely randomly.
Pair Corralation between GAMESTOP and Airbus SE
Assuming the 90 days trading horizon GAMESTOP is expected to generate 6.17 times more return on investment than Airbus SE. However, GAMESTOP is 6.17 times more volatile than Airbus SE. It trades about 0.04 of its potential returns per unit of risk. Airbus SE is currently generating about 0.04 per unit of risk. If you would invest 2,052 in GAMESTOP on September 12, 2024 and sell it today you would earn a total of 515.00 from holding GAMESTOP or generate 25.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GAMESTOP vs. Airbus SE
Performance |
| Timeline |
| GAMESTOP |
| Airbus SE |
GAMESTOP and Airbus SE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GAMESTOP and Airbus SE
The main advantage of trading using opposite GAMESTOP and Airbus SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GAMESTOP position performs unexpectedly, Airbus SE 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 Airbus SE will offset losses from the drop in Airbus SE's long position.The idea behind GAMESTOP and Airbus SE 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.| Airbus SE vs. Airbus SE | Airbus SE vs. General Dynamics | Airbus SE vs. Superior Plus Corp | Airbus SE vs. Origin Agritech |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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