Correlation Between GameStop Corp and Advanced Micro

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

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

Diversification Opportunities for GameStop Corp and Advanced Micro

0.66

Correlation Coefficient

GameStop Corp  Advanced Micro

Poor diversification

The 3 months correlation between GameStop and Advanced is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding GameStop Corp and Advanced Micro Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Micro Devices 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 Advanced Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Micro Devices has no effect on the direction of GameStop Corp i.e., GameStop Corp and Advanced Micro go up and down completely randomly.

Pair Corralation between GameStop Corp and Advanced Micro

Considering the 90-day investment horizon GameStop Corp is expected to under-perform the Advanced Micro. In addition to that, GameStop Corp is 1.55 times more volatile than Advanced Micro Devices. It trades about -0.01 of its total potential returns per unit of risk. Advanced Micro Devices is currently generating about 0.04 per unit of volatility. If you would invest  9,534  in Advanced Micro Devices on January 26, 2024 and sell it today you would earn a total of  5,640  from holding Advanced Micro Devices or generate 59.16% return on investment over 90 days.

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

GameStop Corp  vs.  Advanced Micro Devices

GameStop Corp

Risk-Adjusted Performance

0 of 100

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 uncertain performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Advanced Micro Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Micro Devices has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with GameStop Corp and Advanced Micro

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

The idea behind GameStop Corp and Advanced Micro Devices 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.