Correlation Between GAMESTOP and SMA Solar

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

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

Diversification Opportunities for GAMESTOP and SMA Solar

-0.82

Correlation Coefficient

GAMESTOP  SMA Solar

Pay attention - limited upside

The 3 months correlation between GAMESTOP and SMA is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding GAMESTOP and SMA Solar Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMA Solar Technology 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 SMA Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMA Solar Technology has no effect on the direction of GAMESTOP i.e., GAMESTOP and SMA Solar go up and down completely randomly.

Pair Corralation between GAMESTOP and SMA Solar

Assuming the 90 days trading horizon GAMESTOP is expected to generate 0.86 times more return on investment than SMA Solar. However, GAMESTOP is 1.16 times less risky than SMA Solar. It trades about 0.2 of its potential returns per unit of risk. SMA Solar Technology is currently generating about -0.05 per unit of risk. If you would invest  1,809  in GAMESTOP on September 14, 2024 and sell it today you would earn a total of  935.00  from holding GAMESTOP or generate 51.69% return on investment over 90 days.

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

GAMESTOP  vs.  SMA Solar Technology

GAMESTOP

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GAMESTOP are ranked lower than 15 (%) 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.

SMA Solar Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SMA Solar Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with GAMESTOP and SMA Solar

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

The idea behind GAMESTOP and SMA Solar Technology 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.