Correlation Between Gap, and Sphere Entertainment

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

By analyzing existing cross correlation between The Gap, and Sphere Entertainment Co, you can compare the effects of market volatilities on Gap, and Sphere Entertainment 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 Gap, with a short position of Sphere Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gap, and Sphere Entertainment.

Diversification Opportunities for Gap, and Sphere Entertainment

0.59

Correlation Coefficient

Gap,  Sphere Entertainment

Very weak diversification

The 3 months correlation between Gap, and Sphere is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, and Sphere Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sphere Entertainment and Gap, 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 The Gap, are associated (or correlated) with Sphere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sphere Entertainment has no effect on the direction of Gap, i.e., Gap, and Sphere Entertainment go up and down completely randomly.

Pair Corralation between Gap, and Sphere Entertainment

Considering the 90-day investment horizon The Gap, is expected to generate 1.21 times more return on investment than Sphere Entertainment. However, Gap, is 1.21 times more volatile than Sphere Entertainment Co. It trades about -0.03 of its potential returns per unit of risk. Sphere Entertainment Co is currently generating about -0.08 per unit of risk. If you would invest  2,340  in The Gap, on December 28, 2024 and sell it today you would lose (217.00) from holding The Gap, or give up 9.27% of portfolio value over 90 days.

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

The Gap,  vs.  Sphere Entertainment Co

Gap,

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Gap, has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest abnormal performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Sphere Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Gap, and Sphere Entertainment

The main advantage of trading using opposite Gap, and Sphere Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gap, position performs unexpectedly, Sphere Entertainment 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 Sphere Entertainment will offset losses from the drop in Sphere Entertainment's long position.

The idea behind The Gap, and Sphere Entertainment Co 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.