Correlation Between GMS and Chemours

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

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

Diversification Opportunities for GMS and Chemours

0.71

Correlation Coefficient

GMS  Chemours

Poor diversification

The 3 months correlation between GMS and Chemours is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Chemours Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemours 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 Chemours. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemours has no effect on the direction of GMS i.e., GMS and Chemours go up and down completely randomly.

Pair Corralation between GMS and Chemours

Considering the 90-day investment horizon GMS Inc is expected to generate 0.66 times more return on investment than Chemours. However, GMS Inc is 1.51 times less risky than Chemours. It trades about -0.51 of its potential returns per unit of risk. Chemours Co is currently generating about -0.49 per unit of risk. If you would invest  10,035  in GMS Inc on September 30, 2024 and sell it today you would lose (1,551) from holding GMS Inc or give up 15.46% 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.  Chemours Co

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.

Chemours

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chemours Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with GMS and Chemours

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

The idea behind GMS Inc and Chemours Co 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.