Correlation Between GameStop Corp and Best Buy

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

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

Diversification Opportunities for GameStop Corp and Best Buy

-0.22

Correlation Coefficient

GameStop Corp  Best Buy

Very good diversification

The 3 months correlation between GameStop and Best is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding GameStop Corp and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy and GameStop Corp 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 GameStop Corp are associated (or correlated) with Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of GameStop Corp i.e., GameStop Corp and Best Buy go up and down completely randomly.

Pair Corralation between GameStop Corp and Best Buy

Considering the 90-day investment horizon GameStop Corp is expected to under-perform the Best Buy. In addition to that, GameStop Corp is 2.39 times more volatile than Best Buy Co. It trades about -0.06 of its total potential returns per unit of risk. Best Buy Co is currently generating about 0.02 per unit of volatility. If you would invest  8,904  in Best Buy Co on November 28, 2024 and sell it today you would earn a total of  105.00  from holding Best Buy Co or generate 1.18% return on investment over 90 days.

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

GameStop Corp  vs.  Best Buy Co

GameStop Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days GameStop Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Best Buy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Best Buy Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, Best Buy is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GameStop Corp and Best Buy

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

The idea behind GameStop Corp and Best Buy 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.