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 Co, 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

0.32
  Correlation Coefficient

Weak diversification

The 3 months correlation between GameStop and Best Buy is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding GameStop Corp and Best Buy Co 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 generate 18.94 times less return on investment than Best Buy. In addition to that, GameStop Corp is 1.09 times more volatile than Best Buy Co. It trades about 0.01 of its total potential returns per unit of risk. Best Buy Co is currently generating about 0.26 per unit of volatility. If you would invest  6,866  in Best Buy Co on September 6, 2022 and sell it today you would earn a total of  1,566  from holding Best Buy Co or generate 22.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

GameStop Corp  vs.  Best Buy Co

 Performance (%) 
       Timeline  
GameStop Corp 
GameStop Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in GameStop Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting primary indicators, GameStop Corp may actually be approaching a critical reversion point that can send shares even higher in January 2023.

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 Co 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   
       Returns  

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 Co 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.
Best Buy vs. AutoZone
Best Buy vs. Build-A-Bear Workshop
Best Buy vs. Bath Body Works
Best Buy vs. National Vision Holdings
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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