Correlation Between GMS and Ameriprise Financial

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

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

Diversification Opportunities for GMS and Ameriprise Financial

0.67

Correlation Coefficient

GMS  Ameriprise Financial

Poor diversification

The 3 months correlation between GMS and Ameriprise is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Ameriprise Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameriprise Financial 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 Ameriprise Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameriprise Financial has no effect on the direction of GMS i.e., GMS and Ameriprise Financial go up and down completely randomly.

Pair Corralation between GMS and Ameriprise Financial

Considering the 90-day investment horizon GMS Inc is expected to under-perform the Ameriprise Financial. In addition to that, GMS is 1.01 times more volatile than Ameriprise Financial. It trades about -0.05 of its total potential returns per unit of risk. Ameriprise Financial is currently generating about 0.13 per unit of volatility. If you would invest  46,844  in Ameriprise Financial on September 30, 2024 and sell it today you would earn a total of  6,751  from holding Ameriprise Financial or generate 14.41% return on investment over 90 days.

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

GMS Inc  vs.  Ameriprise Financial

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.

Ameriprise Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ameriprise Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain primary indicators, Ameriprise Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GMS and Ameriprise Financial

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

The idea behind GMS Inc and Ameriprise Financial 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.