Correlation Between ITALIAN WINE and GAMESTOP
Can any of the company-specific risk be diversified away by investing in both ITALIAN WINE 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 ITALIAN WINE and GAMESTOP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ITALIAN WINE BRANDS and GAMESTOP, you can compare the effects of market volatilities on ITALIAN WINE 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 ITALIAN WINE with a short position of GAMESTOP. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITALIAN WINE and GAMESTOP.
Diversification Opportunities for ITALIAN WINE and GAMESTOP
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between ITALIAN and GAMESTOP is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding ITALIAN WINE BRANDS and GAMESTOP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAMESTOP and ITALIAN WINE 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 ITALIAN WINE BRANDS 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 ITALIAN WINE i.e., ITALIAN WINE and GAMESTOP go up and down completely randomly.
Pair Corralation between ITALIAN WINE and GAMESTOP
Assuming the 90 days horizon ITALIAN WINE is expected to generate 9.84 times less return on investment than GAMESTOP. But when comparing it to its historical volatility, ITALIAN WINE BRANDS is 3.55 times less risky than GAMESTOP. It trades about 0.01 of its potential returns per unit of risk. GAMESTOP is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,125 in GAMESTOP on December 12, 2024 and sell it today you would lose (54.00) from holding GAMESTOP or give up 2.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ITALIAN WINE BRANDS vs. GAMESTOP
Performance |
| Timeline |
| ITALIAN WINE BRANDS |
| GAMESTOP |
ITALIAN WINE and GAMESTOP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ITALIAN WINE and GAMESTOP
The main advantage of trading using opposite ITALIAN WINE and GAMESTOP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITALIAN WINE 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.| ITALIAN WINE vs. Treasury Wine Estates | ||
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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