Correlation Between CosmoSteel Holdings and GAMESTOP

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

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

Diversification Opportunities for CosmoSteel Holdings and GAMESTOP

0.22

Correlation Coefficient

CosmoSteel Holdings  GAMESTOP

Modest diversification

The 3 months correlation between CosmoSteel and GAMESTOP is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding CosmoSteel Holdings Limited and GAMESTOP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAMESTOP and CosmoSteel Holdings 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 CosmoSteel Holdings Limited are associated (or correlated) with GAMESTOP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAMESTOP has no effect on the direction of CosmoSteel Holdings i.e., CosmoSteel Holdings and GAMESTOP go up and down completely randomly.

Pair Corralation between CosmoSteel Holdings and GAMESTOP

Assuming the 90 days horizon CosmoSteel Holdings is expected to generate 4.76 times less return on investment than GAMESTOP. But when comparing it to its historical volatility, CosmoSteel Holdings Limited is 1.16 times less risky than GAMESTOP. It trades about 0.07 of its potential returns per unit of risk. GAMESTOP is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  1,901  in GAMESTOP on September 25, 2024 and sell it today you would earn a total of  1,050  from holding GAMESTOP or generate 55.23% return on investment over 90 days.

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

CosmoSteel Holdings Limited  vs.  GAMESTOP

CosmoSteel Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

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

GAMESTOP

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GAMESTOP are ranked lower than 14 (%) 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.

Pair Trading with CosmoSteel Holdings and GAMESTOP

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

The idea behind CosmoSteel Holdings Limited and GAMESTOP 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.