Correlation Between GameStop Corp and DOCDATA

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

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

Diversification Opportunities for GameStop Corp and DOCDATA

-0.8

Correlation Coefficient

GameStop Corp  DOCDATA

Pay attention - limited upside

The 3 months correlation between GameStop and DOCDATA is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding GameStop Corp and DOCDATA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOCDATA 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 DOCDATA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOCDATA has no effect on the direction of GameStop Corp i.e., GameStop Corp and DOCDATA go up and down completely randomly.

Pair Corralation between GameStop Corp and DOCDATA

Assuming the 90 days trading horizon GameStop Corp is expected to generate 1.21 times more return on investment than DOCDATA. However, GameStop Corp is 1.21 times more volatile than DOCDATA. It trades about 0.18 of its potential returns per unit of risk. DOCDATA is currently generating about -0.06 per unit of risk. If you would invest  1,828  in GameStop Corp on September 12, 2024 and sell it today you would earn a total of  864.00  from holding GameStop Corp or generate 47.26% return on investment over 90 days.

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

GameStop Corp  vs.  DOCDATA

GameStop Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GameStop Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GameStop Corp reported solid returns over the last few months and may actually be approaching a breakup point.

DOCDATA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DOCDATA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with GameStop Corp and DOCDATA

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

The idea behind GameStop Corp and DOCDATA 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.