Correlation Between GMS and Armstrong World

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

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

Diversification Opportunities for GMS and Armstrong World

0.76

Correlation Coefficient

GMS  Armstrong World

Poor diversification

The 3 months correlation between GMS and Armstrong is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Armstrong World Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Armstrong World Indu 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 Armstrong World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Armstrong World Indu has no effect on the direction of GMS i.e., GMS and Armstrong World go up and down completely randomly.

Pair Corralation between GMS and Armstrong World

Considering the 90-day investment horizon GMS Inc is expected to under-perform the Armstrong World. In addition to that, GMS is 1.1 times more volatile than Armstrong World Industries. It trades about -0.23 of its total potential returns per unit of risk. Armstrong World Industries is currently generating about -0.04 per unit of volatility. If you would invest  15,983  in Armstrong World Industries on November 29, 2024 and sell it today you would lose (651.00) from holding Armstrong World Industries or give up 4.07% of portfolio value over 90 days.

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

GMS Inc  vs.  Armstrong World Industries

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 March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Armstrong World Indu

Risk-Adjusted Performance

Very Weak

Over the last 90 days Armstrong World Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Armstrong World is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with GMS and Armstrong World

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

The idea behind GMS Inc and Armstrong World Industries 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.