Correlation Between CVW CleanTech and GMS

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

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

Diversification Opportunities for CVW CleanTech and GMS

0.3

Correlation Coefficient

CVW CleanTech  GMS

Weak diversification

The 3 months correlation between CVW and GMS is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding CVW CleanTech and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc and CVW CleanTech 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 CVW CleanTech 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 CVW CleanTech i.e., CVW CleanTech and GMS go up and down completely randomly.

Pair Corralation between CVW CleanTech and GMS

Assuming the 90 days horizon CVW CleanTech is expected to generate 3.5 times more return on investment than GMS. However, CVW CleanTech is 3.5 times more volatile than GMS Inc. It trades about 0.01 of its potential returns per unit of risk. GMS Inc is currently generating about -0.16 per unit of risk. If you would invest  65.00  in CVW CleanTech on December 22, 2024 and sell it today you would lose (4.00) from holding CVW CleanTech or give up 6.15% of portfolio value over 90 days.

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

CVW CleanTech  vs.  GMS Inc

CVW CleanTech

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CVW CleanTech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, CVW CleanTech is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

GMS Inc

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with CVW CleanTech and GMS

The main advantage of trading using opposite CVW CleanTech and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVW CleanTech 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 CVW CleanTech 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .