Correlation Between Gamestop Corp and Best Buy

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Can any of the company-specific risk be diversified away by investing in both Gamestop Corp and Best Buy 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 Best Buy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gamestop Corp and Best Buy Company, you can compare the effects of market volatilities on Gamestop Corp and Best Buy 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 Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gamestop Corp and Best Buy.

Diversification Opportunities for Gamestop Corp and Best Buy

  Correlation Coefficient

Weak diversification

The 3 months correlation between Gamestop and Best Buy is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Gamestop Corp and Best Buy Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy 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 Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of Gamestop Corp i.e., Gamestop Corp and Best Buy go up and down completely randomly.

Pair Corralation between Gamestop Corp and Best Buy

Considering the 90-day investment horizon Gamestop Corp is expected to under-perform the Best Buy. In addition to that, Gamestop Corp is 1.05 times more volatile than Best Buy Company. It trades about -0.06 of its total potential returns per unit of risk. Best Buy Company is currently generating about 0.25 per unit of volatility. If you would invest  6,841  in Best Buy Company on September 1, 2022 and sell it today you would earn a total of  1,545  from holding Best Buy Company or generate 22.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
ValuesDaily Returns

Gamestop Corp  vs.  Best Buy Company

 Performance (%) 
Gamestop Corp 
Gamestop Performance
0 of 100
Over the last 90 days Gamestop Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Gamestop Corp is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Gamestop Price Channel

Best Buy 
Best Buy Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Best Buy Company are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting fundamental drivers, Best Buy showed solid returns over the last few months and may actually be approaching a breakup point.

Best Buy Price Channel

Gamestop Corp and Best Buy Volatility Contrast

   Predicted Return Density   

Pair Trading with Gamestop Corp and Best Buy

The main advantage of trading using opposite Gamestop Corp and Best Buy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gamestop Corp position performs unexpectedly, Best Buy 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 Best Buy will offset losses from the drop in Best Buy's long position.
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The idea behind Gamestop Corp and Best Buy Company 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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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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