Correlation Between GAMESTOP and Kaiser Aluminum

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

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

Diversification Opportunities for GAMESTOP and Kaiser Aluminum

0.57

Correlation Coefficient

GAMESTOP  Kaiser Aluminum

Very weak diversification

The 3 months correlation between GAMESTOP and Kaiser is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding GAMESTOP and Kaiser Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaiser Aluminum 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 Kaiser Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaiser Aluminum has no effect on the direction of GAMESTOP i.e., GAMESTOP and Kaiser Aluminum go up and down completely randomly.

Pair Corralation between GAMESTOP and Kaiser Aluminum

Assuming the 90 days trading horizon GAMESTOP is expected to generate 2.4 times more return on investment than Kaiser Aluminum. However, GAMESTOP is 2.4 times more volatile than Kaiser Aluminum. It trades about 0.27 of its potential returns per unit of risk. Kaiser Aluminum is currently generating about -0.27 per unit of risk. If you would invest  2,660  in GAMESTOP on October 9, 2024 and sell it today you would earn a total of  479.00  from holding GAMESTOP or generate 18.01% return on investment over 90 days.

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

GAMESTOP  vs.  Kaiser Aluminum

GAMESTOP

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GAMESTOP are ranked lower than 20 (%) 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.

Kaiser Aluminum

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kaiser Aluminum are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Kaiser Aluminum may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with GAMESTOP and Kaiser Aluminum

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

The idea behind GAMESTOP and Kaiser Aluminum 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 Transaction History module to view history of all your transactions and understand their impact on performance.