Correlation Between GAMESTOP and Xero

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

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

Diversification Opportunities for GAMESTOP and Xero

0.24

Correlation Coefficient

GAMESTOP  Xero

Modest diversification

The 3 months correlation between GAMESTOP and Xero is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding GAMESTOP and Xero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xero and GAMESTOP 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 are associated (or correlated) with Xero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xero has no effect on the direction of GAMESTOP i.e., GAMESTOP and Xero go up and down completely randomly.

Pair Corralation between GAMESTOP and Xero

Assuming the 90 days trading horizon GAMESTOP is expected to under-perform the Xero. In addition to that, GAMESTOP is 1.64 times more volatile than Xero. It trades about -0.16 of its total potential returns per unit of risk. Xero is currently generating about -0.07 per unit of volatility. If you would invest  9,900  in Xero on December 21, 2024 and sell it today you would lose (800.00) from holding Xero or give up 8.08% of portfolio value over 90 days.

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

GAMESTOP  vs.  Xero

GAMESTOP

Risk-Adjusted Performance

Very Weak

Over the last 90 days GAMESTOP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Xero

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xero 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.

Pair Trading with GAMESTOP and Xero

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

The idea behind GAMESTOP and Xero 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.

Check out your portfolio center.

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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.