Correlation Between GameStop Corp and Target

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

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

Diversification Opportunities for GameStop Corp and Target

-0.39

Correlation Coefficient

GameStop Corp  Target

Very good diversification

The 3 months correlation between GameStop and Target is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding GameStop Corp and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target 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 Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of GameStop Corp i.e., GameStop Corp and Target go up and down completely randomly.

Pair Corralation between GameStop Corp and Target

Considering the 90-day investment horizon GameStop Corp is expected to generate 6.04 times more return on investment than Target. However, GameStop Corp is 6.04 times more volatile than Target. It trades about 0.06 of its potential returns per unit of risk. Target is currently generating about -0.18 per unit of risk. If you would invest  1,526  in GameStop Corp on February 5, 2024 and sell it today you would earn a total of  121.00  from holding GameStop Corp or generate 7.93% return on investment over 90 days.

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

GameStop Corp  vs.  Target

GameStop Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GameStop Corp are ranked lower than 6 (%) 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.

Target

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Target are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, Target may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with GameStop Corp and Target

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

The idea behind GameStop Corp and Target 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.