Correlation Between Applied Materials and GameStop Corp

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

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

Diversification Opportunities for Applied Materials and GameStop Corp

-0.69

Correlation Coefficient

Applied Materials  GameStop Corp

Excellent diversification

The 3 months correlation between Applied and GameStop is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and GameStop Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GameStop Corp and Applied Materials 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 Applied Materials 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 Applied Materials i.e., Applied Materials and GameStop Corp go up and down completely randomly.

Pair Corralation between Applied Materials and GameStop Corp

Assuming the 90 days trading horizon Applied Materials is expected to generate 0.53 times more return on investment than GameStop Corp. However, Applied Materials is 1.89 times less risky than GameStop Corp. It trades about 0.13 of its potential returns per unit of risk. GameStop Corp is currently generating about -0.05 per unit of risk. If you would invest  294,262  in Applied Materials on April 25, 2025 and sell it today you would earn a total of  52,607  from holding Applied Materials or generate 17.88% return on investment over 90 days.

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

Applied Materials  vs.  GameStop Corp

Applied Materials

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Applied Materials showed solid returns over the last few months and may actually be approaching a breakup point.

GameStop Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days GameStop Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in August 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Applied Materials and GameStop Corp

The main advantage of trading using opposite Applied Materials and GameStop Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials 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 Applied Materials 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.