Correlation Between Home Depot and GameStop Corp

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

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

Diversification Opportunities for Home Depot and GameStop Corp

0.62

Correlation Coefficient

Home Depot  GameStop Corp

Poor diversification

The 3 months correlation between Home and GameStop is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding The Home Depot and GameStop Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GameStop Corp and Home Depot 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 The Home Depot 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 Home Depot i.e., Home Depot and GameStop Corp go up and down completely randomly.

Pair Corralation between Home Depot and GameStop Corp

Assuming the 90 days horizon The Home Depot is expected to generate 0.27 times more return on investment than GameStop Corp. However, The Home Depot is 3.64 times less risky than GameStop Corp. It trades about -0.01 of its potential returns per unit of risk. GameStop Corp is currently generating about -0.05 per unit of risk. If you would invest  683,391  in The Home Depot on April 20, 2025 and sell it today you would lose (8,651) from holding The Home Depot or give up 1.27% of portfolio value over 90 days.

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

The Home Depot  vs.  GameStop Corp

Home Depot

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Home Depot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Home Depot is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 unfluctuating 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 Home Depot and GameStop Corp

The main advantage of trading using opposite Home Depot and GameStop Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot 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 The Home Depot 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.