Correlation Between GameStop Corp and UNICREDIT SPA

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

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

Diversification Opportunities for GameStop Corp and UNICREDIT SPA

-0.29

Correlation Coefficient

GameStop Corp  UNICREDIT SPA

Very good diversification

The 3 months correlation between GameStop and UNICREDIT is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding GameStop Corp and UNICREDIT SPA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNICREDIT SPA ADR 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 UNICREDIT SPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNICREDIT SPA ADR has no effect on the direction of GameStop Corp i.e., GameStop Corp and UNICREDIT SPA go up and down completely randomly.

Pair Corralation between GameStop Corp and UNICREDIT SPA

Assuming the 90 days trading horizon GameStop Corp is expected to under-perform the UNICREDIT SPA. In addition to that, GameStop Corp is 1.96 times more volatile than UNICREDIT SPA ADR. It trades about -0.2 of its total potential returns per unit of risk. UNICREDIT SPA ADR is currently generating about 0.45 per unit of volatility. If you would invest  1,850  in UNICREDIT SPA ADR on October 22, 2024 and sell it today you would earn a total of  230.00  from holding UNICREDIT SPA ADR or generate 12.43% 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.  UNICREDIT SPA ADR

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.

UNICREDIT SPA ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in UNICREDIT SPA ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward indicators, UNICREDIT SPA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with GameStop Corp and UNICREDIT SPA

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

The idea behind GameStop Corp and UNICREDIT SPA ADR 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.