Correlation Between GameStop Corp and Li Ning

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

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

Diversification Opportunities for GameStop Corp and Li Ning

0.21

Correlation Coefficient

GameStop Corp  Li Ning

Modest diversification

The 3 months correlation between GameStop and LNLB is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding GameStop Corp and Li Ning Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Ning Company 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 Li Ning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li Ning Company has no effect on the direction of GameStop Corp i.e., GameStop Corp and Li Ning go up and down completely randomly.

Pair Corralation between GameStop Corp and Li Ning

Assuming the 90 days trading horizon GameStop Corp is expected to generate 2.66 times less return on investment than Li Ning. In addition to that, GameStop Corp is 1.05 times more volatile than Li Ning Company. It trades about 0.04 of its total potential returns per unit of risk. Li Ning Company is currently generating about 0.12 per unit of volatility. If you would invest  196.00  in Li Ning Company on September 13, 2024 and sell it today you would earn a total of  15.00  from holding Li Ning Company or generate 7.65% return on investment over 90 days.

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

GameStop Corp  vs.  Li Ning Company

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.

Li Ning Company

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with GameStop Corp and Li Ning

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

The idea behind GameStop Corp and Li Ning Company 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.