Correlation Between Barings BDC and GameStop Corp

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

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

Diversification Opportunities for Barings BDC and GameStop Corp

0.69

Correlation Coefficient

Barings BDC  GameStop Corp

Poor diversification

The 3 months correlation between Barings and GameStop is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Barings BDC and GameStop Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GameStop Corp and Barings BDC 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 Barings BDC 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 Barings BDC i.e., Barings BDC and GameStop Corp go up and down completely randomly.

Pair Corralation between Barings BDC and GameStop Corp

Given the investment horizon of 90 days Barings BDC is expected to generate 4.37 times less return on investment than GameStop Corp. But when comparing it to its historical volatility, Barings BDC is 6.59 times less risky than GameStop Corp. It trades about 0.07 of its potential returns per unit of risk. GameStop Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,910  in GameStop Corp on September 17, 2024 and sell it today you would earn a total of  902.00  from holding GameStop Corp or generate 47.23% return on investment over 90 days.

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

Barings BDC  vs.  GameStop Corp

Barings BDC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Barings BDC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Barings BDC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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. In spite of rather uncertain primary indicators, GameStop Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Barings BDC and GameStop Corp

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

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..