Correlation Between Crown LNG and GMS

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

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

Diversification Opportunities for Crown LNG and GMS

0.68

Correlation Coefficient

Crown LNG  GMS

Poor diversification

The 3 months correlation between Crown and GMS is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Crown LNG Holdings and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc and Crown LNG 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 Crown LNG Holdings 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 Crown LNG i.e., Crown LNG and GMS go up and down completely randomly.

Pair Corralation between Crown LNG and GMS

Assuming the 90 days horizon Crown LNG Holdings is expected to generate 13.57 times more return on investment than GMS. However, Crown LNG is 13.57 times more volatile than GMS Inc. It trades about 0.15 of its potential returns per unit of risk. GMS Inc is currently generating about 0.04 per unit of risk. If you would invest  1.36  in Crown LNG Holdings on September 14, 2024 and sell it today you would earn a total of  1.28  from holding Crown LNG Holdings or generate 94.12% return on investment over 90 days.

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

Crown LNG Holdings  vs.  GMS Inc

Crown LNG Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Crown LNG Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Crown LNG showed solid returns over the last few months and may actually be approaching a breakup point.

GMS Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GMS Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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 Crown LNG and GMS

The main advantage of trading using opposite Crown LNG and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crown LNG 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 Crown LNG Holdings 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.