Correlation Between GMS and Montana Technologies

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

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

Diversification Opportunities for GMS and Montana Technologies

0.23

Correlation Coefficient

GMS  Montana Technologies

Modest diversification

The 3 months correlation between GMS and Montana is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Montana Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montana Technologies and GMS 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 GMS Inc are associated (or correlated) with Montana Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montana Technologies has no effect on the direction of GMS i.e., GMS and Montana Technologies go up and down completely randomly.

Pair Corralation between GMS and Montana Technologies

Considering the 90-day investment horizon GMS Inc is expected to under-perform the Montana Technologies. But the stock apears to be less risky and, when comparing its historical volatility, GMS Inc is 3.13 times less risky than Montana Technologies. The stock trades about -0.37 of its potential returns per unit of risk. The Montana Technologies is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  753.00  in Montana Technologies on September 20, 2024 and sell it today you would earn a total of  190.00  from holding Montana Technologies or generate 25.23% return on investment over 90 days.

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

GMS Inc  vs.  Montana Technologies

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.

Montana Technologies

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Montana Technologies are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Montana Technologies revealed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GMS and Montana Technologies

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

The idea behind GMS Inc and Montana Technologies 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.