Correlation Between GameStop Corp and China Communications

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

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

Diversification Opportunities for GameStop Corp and China Communications

0.1

Correlation Coefficient

GameStop Corp  China Communications

Average diversification

The 3 months correlation between GameStop and China is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding GameStop Corp and China Communications Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Communications and GameStop Corp 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 Corp are associated (or correlated) with China Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Communications has no effect on the direction of GameStop Corp i.e., GameStop Corp and China Communications go up and down completely randomly.

Pair Corralation between GameStop Corp and China Communications

Assuming the 90 days trading horizon GameStop Corp is expected to generate 1.87 times more return on investment than China Communications. However, GameStop Corp is 1.87 times more volatile than China Communications Services. It trades about 0.12 of its potential returns per unit of risk. China Communications Services is currently generating about 0.07 per unit of risk. If you would invest  2,030  in GameStop Corp on September 4, 2024 and sell it today you would earn a total of  653.00  from holding GameStop Corp or generate 32.17% return on investment over 90 days.

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

GameStop Corp  vs.  China Communications Services

GameStop Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GameStop Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, GameStop Corp reported solid returns over the last few months and may actually be approaching a breakup point.

China Communications

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Communications Services are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GameStop Corp and China Communications

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

The idea behind GameStop Corp and China Communications Services 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 Stocks Directory module to find actively traded stocks across global markets.