Correlation Between GMS and Cardinal Health
Can any of the company-specific risk be diversified away by investing in both GMS and Cardinal Health 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 Cardinal Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and Cardinal Health, you can compare the effects of market volatilities on GMS and Cardinal Health 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 Cardinal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and Cardinal Health.
Diversification Opportunities for GMS and Cardinal Health
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GMS and Cardinal is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health 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 Cardinal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardinal Health has no effect on the direction of GMS i.e., GMS and Cardinal Health go up and down completely randomly.
Pair Corralation between GMS and Cardinal Health
Considering the 90-day investment horizon GMS Inc is expected to generate 1.11 times more return on investment than Cardinal Health. However, GMS is 1.11 times more volatile than Cardinal Health. It trades about 0.22 of its potential returns per unit of risk. Cardinal Health is currently generating about 0.12 per unit of risk. If you would invest 8,245 in GMS Inc on September 5, 2024 and sell it today you would earn a total of 2,023 from holding GMS Inc or generate 24.54% 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. Cardinal Health
Performance |
Timeline |
GMS Inc |
Cardinal Health |
GMS and Cardinal Health Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GMS and Cardinal Health
The main advantage of trading using opposite GMS and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, Cardinal Health 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 Cardinal Health will offset losses from the drop in Cardinal Health's long position.GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
Cardinal Health vs. Humana Inc | Cardinal Health vs. Elevance Health | Cardinal Health vs. UnitedHealth Group Incorporated | Cardinal Health vs. Molina Healthcare |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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