Correlation Between GameStop Corp and Encore Wire
Can any of the company-specific risk be diversified away by investing in both GameStop Corp and Encore Wire 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 Encore Wire into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GameStop Corp and Encore Wire, you can compare the effects of market volatilities on GameStop Corp and Encore Wire 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 Encore Wire. Check out your portfolio center. Please also check ongoing floating volatility patterns of GameStop Corp and Encore Wire.
Diversification Opportunities for GameStop Corp and Encore Wire
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between GameStop and Encore is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding GameStop Corp and Encore Wire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Encore Wire 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 Encore Wire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Encore Wire has no effect on the direction of GameStop Corp i.e., GameStop Corp and Encore Wire go up and down completely randomly.
Pair Corralation between GameStop Corp and Encore Wire
Considering the 90-day investment horizon GameStop Corp is expected to generate 8.7 times more return on investment than Encore Wire. However, GameStop Corp is 8.7 times more volatile than Encore Wire. It trades about 0.13 of its potential returns per unit of risk. Encore Wire is currently generating about 0.06 per unit of risk. If you would invest 1,199 in GameStop Corp on February 28, 2024 and sell it today you would earn a total of 701.00 from holding GameStop Corp or generate 58.47% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
GameStop Corp vs. Encore Wire
Performance |
Timeline |
GameStop Corp |
Encore Wire |
GameStop Corp and Encore Wire Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GameStop Corp and Encore Wire
The main advantage of trading using opposite GameStop Corp and Encore Wire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GameStop Corp position performs unexpectedly, Encore Wire 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 Encore Wire will offset losses from the drop in Encore Wire's long position.GameStop Corp vs. Target | GameStop Corp vs. Lowes Companies | GameStop Corp vs. Kohls Corp | GameStop Corp vs. Gap Inc |
Encore Wire vs. Advanced Energy Industries | Encore Wire vs. Acuity Brands | Encore Wire vs. Enersys | Encore Wire vs. nVent Electric PLC |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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