Correlation Between GameStop Corp and ArcelorMittal

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

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

Diversification Opportunities for GameStop Corp and ArcelorMittal

0.73

Correlation Coefficient

GameStop Corp  ArcelorMittal

Poor diversification

The 3 months correlation between GameStop and ArcelorMittal is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding GameStop Corp and ArcelorMittal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal 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 ArcelorMittal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcelorMittal has no effect on the direction of GameStop Corp i.e., GameStop Corp and ArcelorMittal go up and down completely randomly.

Pair Corralation between GameStop Corp and ArcelorMittal

Assuming the 90 days trading horizon GameStop Corp is expected to generate 1.74 times more return on investment than ArcelorMittal. However, GameStop Corp is 1.74 times more volatile than ArcelorMittal. It trades about 0.15 of its potential returns per unit of risk. ArcelorMittal is currently generating about 0.17 per unit of risk. If you would invest  1,878  in GameStop Corp on September 13, 2024 and sell it today you would earn a total of  673.00  from holding GameStop Corp or generate 35.84% return on investment over 90 days.

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

GameStop Corp  vs.  ArcelorMittal

GameStop Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GameStop Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GameStop Corp reported solid returns over the last few months and may actually be approaching a breakup point.

ArcelorMittal

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ArcelorMittal are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, ArcelorMittal reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GameStop Corp and ArcelorMittal

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

The idea behind GameStop Corp and ArcelorMittal 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.