Correlation Between GameStop Corp and LENNAR CORP

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

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

Diversification Opportunities for GameStop Corp and LENNAR CORP

0.19

Correlation Coefficient

GameStop Corp  LENNAR CORP

Average diversification

The 3 months correlation between GameStop and LENNAR is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding GameStop Corp and LENNAR P B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LENNAR CORP 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 LENNAR CORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LENNAR CORP has no effect on the direction of GameStop Corp i.e., GameStop Corp and LENNAR CORP go up and down completely randomly.

Pair Corralation between GameStop Corp and LENNAR CORP

Assuming the 90 days trading horizon GameStop Corp is expected to generate 1.02 times more return on investment than LENNAR CORP. However, GameStop Corp is 1.02 times more volatile than LENNAR P B. It trades about -0.06 of its potential returns per unit of risk. LENNAR P B is currently generating about -0.13 per unit of risk. If you would invest  2,683  in GameStop Corp on November 29, 2024 and sell it today you would lose (368.00) from holding GameStop Corp or give up 13.72% of portfolio value over 90 days.

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

GameStop Corp  vs.  LENNAR P B

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. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

LENNAR CORP

Risk-Adjusted Performance

Very Weak

Over the last 90 days LENNAR P B has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with GameStop Corp and LENNAR CORP

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

The idea behind GameStop Corp and LENNAR P B 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..