Correlation Between Montauk Renewables and GameStop Corp

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

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

Diversification Opportunities for Montauk Renewables and GameStop Corp

-0.72

Correlation Coefficient

Montauk Renewables  GameStop Corp

Pay attention - limited upside

The 3 months correlation between Montauk and GameStop is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Montauk Renewables and GameStop Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GameStop Corp and Montauk Renewables 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 Montauk Renewables are associated (or correlated) with GameStop Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GameStop Corp has no effect on the direction of Montauk Renewables i.e., Montauk Renewables and GameStop Corp go up and down completely randomly.

Pair Corralation between Montauk Renewables and GameStop Corp

Given the investment horizon of 90 days Montauk Renewables is expected to under-perform the GameStop Corp. In addition to that, Montauk Renewables is 1.14 times more volatile than GameStop Corp. It trades about -0.02 of its total potential returns per unit of risk. GameStop Corp is currently generating about 0.16 per unit of volatility. If you would invest  2,009  in GameStop Corp on September 16, 2024 and sell it today you would earn a total of  790.00  from holding GameStop Corp or generate 39.32% return on investment over 90 days.

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

Montauk Renewables  vs.  GameStop Corp

Montauk Renewables

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Montauk Renewables is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

GameStop Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GameStop Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, GameStop Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Montauk Renewables and GameStop Corp

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

The idea behind Montauk Renewables and GameStop Corp 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.