Correlation Between Caseys General and GameStop Corp

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

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

Diversification Opportunities for Caseys General and GameStop Corp

0.7

Correlation Coefficient

Caseys General  GameStop Corp

Poor diversification

The 3 months correlation between Caseys and GameStop is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Caseys General Stores and GameStop Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GameStop Corp and Caseys General 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 Caseys General Stores 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 Caseys General i.e., Caseys General and GameStop Corp go up and down completely randomly.

Pair Corralation between Caseys General and GameStop Corp

Assuming the 90 days trading horizon Caseys General Stores is expected to generate 0.25 times more return on investment than GameStop Corp. However, Caseys General Stores is 4.0 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  38,400  in Caseys General Stores on October 22, 2024 and sell it today you would lose (600.00) from holding Caseys General Stores or give up 1.56% of portfolio value over 90 days.

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

Caseys General Stores  vs.  GameStop Corp

Caseys General Stores

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Caseys General Stores are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Caseys General is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 Caseys General and GameStop Corp

The main advantage of trading using opposite Caseys General and GameStop Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caseys General 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 Caseys General Stores 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.