Correlation Between CDL INVESTMENT and GameStop Corp

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

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

Diversification Opportunities for CDL INVESTMENT and GameStop Corp

0.32

Correlation Coefficient

CDL INVESTMENT  GameStop Corp

Weak diversification

The 3 months correlation between CDL and GameStop is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding CDL INVESTMENT and GameStop Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GameStop Corp and CDL INVESTMENT 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 CDL INVESTMENT 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 CDL INVESTMENT i.e., CDL INVESTMENT and GameStop Corp go up and down completely randomly.

Pair Corralation between CDL INVESTMENT and GameStop Corp

Assuming the 90 days trading horizon CDL INVESTMENT is expected to generate 0.67 times more return on investment than GameStop Corp. However, CDL INVESTMENT is 1.48 times less risky than GameStop Corp. It trades about -0.12 of its potential returns per unit of risk. GameStop Corp is currently generating about -0.2 per unit of risk. If you would invest  44.00  in CDL INVESTMENT on October 22, 2024 and sell it today you would lose (2.00) from holding CDL INVESTMENT or give up 4.55% of portfolio value over 90 days.

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

CDL INVESTMENT  vs.  GameStop Corp

CDL INVESTMENT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CDL INVESTMENT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, CDL INVESTMENT is not utilizing all of its potentials. The current 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. Despite nearly uncertain basic indicators, GameStop Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CDL INVESTMENT and GameStop Corp

The main advantage of trading using opposite CDL INVESTMENT and GameStop Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDL INVESTMENT 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 CDL INVESTMENT 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.