Correlation Between GAMESTOP and Apple

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

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

Diversification Opportunities for GAMESTOP and Apple

0.79

Correlation Coefficient

GAMESTOP  Apple

Poor diversification

The 3 months correlation between GAMESTOP and Apple is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding GAMESTOP and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of GAMESTOP i.e., GAMESTOP and Apple go up and down completely randomly.

Pair Corralation between GAMESTOP and Apple

Assuming the 90 days trading horizon GAMESTOP is expected to under-perform the Apple. In addition to that, GAMESTOP is 4.49 times more volatile than Apple Inc. It trades about -0.02 of its total potential returns per unit of risk. Apple Inc is currently generating about 0.48 per unit of volatility. If you would invest  22,135  in Apple Inc on September 24, 2024 and sell it today you would earn a total of  2,015  from holding Apple Inc or generate 9.1% return on investment over 90 days.

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

GAMESTOP  vs.  Apple Inc

GAMESTOP

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GAMESTOP are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GAMESTOP unveiled solid returns over the last few months and may actually be approaching a breakup point.

Apple Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental indicators, Apple sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GAMESTOP and Apple

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

The idea behind GAMESTOP and Apple Inc 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.