Correlation Between NEW MILLENNIUM and GameStop Corp

Can any of the company-specific risk be diversified away by investing in both NEW MILLENNIUM 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 NEW MILLENNIUM and GameStop Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NEW MILLENNIUM IRON and GameStop Corp, you can compare the effects of market volatilities on NEW MILLENNIUM 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 NEW MILLENNIUM with a short position of GameStop Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEW MILLENNIUM and GameStop Corp.

Diversification Opportunities for NEW MILLENNIUM and GameStop Corp

0.39

Correlation Coefficient

NEW MILLENNIUM  GameStop Corp

Weak diversification

The 3 months correlation between NEW and GameStop is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding NEW MILLENNIUM IRON and GameStop Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GameStop Corp and NEW MILLENNIUM 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 NEW MILLENNIUM IRON 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 NEW MILLENNIUM i.e., NEW MILLENNIUM and GameStop Corp go up and down completely randomly.

Pair Corralation between NEW MILLENNIUM and GameStop Corp

Assuming the 90 days trading horizon NEW MILLENNIUM is expected to generate 3.56 times less return on investment than GameStop Corp. But when comparing it to its historical volatility, NEW MILLENNIUM IRON is 1.83 times less risky than GameStop Corp. It trades about 0.08 of its potential returns per unit of risk. GameStop Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,900  in GameStop Corp on October 23, 2024 and sell it today you would earn a total of  756.00  from holding GameStop Corp or generate 39.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

NEW MILLENNIUM IRON  vs.  GameStop Corp

NEW MILLENNIUM IRON

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NEW MILLENNIUM IRON are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, NEW MILLENNIUM may actually be approaching a critical reversion point that can send shares even higher in February 2025.

GameStop Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GameStop Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GameStop Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NEW MILLENNIUM and GameStop Corp

The main advantage of trading using opposite NEW MILLENNIUM and GameStop Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEW MILLENNIUM 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.

The idea behind NEW MILLENNIUM IRON and GameStop Corp 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.