Correlation Between GAMESTOP and United Natural

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

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

Diversification Opportunities for GAMESTOP and United Natural

0.84

Correlation Coefficient

GAMESTOP  United Natural

Very poor diversification

The 3 months correlation between GAMESTOP and United is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding GAMESTOP and United Natural Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Natural Foods 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 United Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Natural Foods has no effect on the direction of GAMESTOP i.e., GAMESTOP and United Natural go up and down completely randomly.

Pair Corralation between GAMESTOP and United Natural

Assuming the 90 days trading horizon GAMESTOP is expected to generate 0.86 times more return on investment than United Natural. However, GAMESTOP is 1.16 times less risky than United Natural. It trades about 0.27 of its potential returns per unit of risk. United Natural Foods is currently generating about 0.18 per unit of risk. If you would invest  1,858  in GAMESTOP on October 9, 2024 and sell it today you would earn a total of  1,411  from holding GAMESTOP or generate 75.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

GAMESTOP  vs.  United Natural Foods

GAMESTOP

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GAMESTOP are ranked lower than 21 (%) 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.

United Natural Foods

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Natural Foods are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, United Natural reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GAMESTOP and United Natural

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

The idea behind GAMESTOP and United Natural Foods 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.