Correlation Between Consol Energy and GMS

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

By analyzing existing cross correlation between Consol Energy and GMS Inc, you can compare the effects of market volatilities on Consol Energy and GMS 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 Consol Energy with a short position of GMS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consol Energy and GMS.

Diversification Opportunities for Consol Energy and GMS

0.86

Correlation Coefficient

Consol Energy  GMS

Very poor diversification

The 3 months correlation between Consol and GMS is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Consol Energy and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc and Consol Energy 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 Consol Energy are associated (or correlated) with GMS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMS Inc has no effect on the direction of Consol Energy i.e., Consol Energy and GMS go up and down completely randomly.

Pair Corralation between Consol Energy and GMS

Given the investment horizon of 90 days Consol Energy is expected to under-perform the GMS. In addition to that, Consol Energy is 1.13 times more volatile than GMS Inc. It trades about -0.32 of its total potential returns per unit of risk. GMS Inc is currently generating about -0.28 per unit of volatility. If you would invest  9,830  in GMS Inc on September 21, 2024 and sell it today you would lose (1,118) from holding GMS Inc or give up 11.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Consol Energy  vs.  GMS Inc

Consol Energy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Consol Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Consol Energy showed solid returns over the last few months and may actually be approaching a breakup point.

GMS Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GMS Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, GMS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Consol Energy and GMS

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

The idea behind Consol Energy and GMS Inc 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.