Correlation Between GMS and Cedar Realty

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

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

Diversification Opportunities for GMS and Cedar Realty

0.59

Correlation Coefficient

GMS  Cedar Realty

Very weak diversification

The 3 months correlation between GMS and Cedar is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Cedar Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cedar Realty Trust 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 Cedar Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cedar Realty Trust has no effect on the direction of GMS i.e., GMS and Cedar Realty go up and down completely randomly.

Pair Corralation between GMS and Cedar Realty

Considering the 90-day investment horizon GMS Inc is expected to under-perform the Cedar Realty. But the stock apears to be less risky and, when comparing its historical volatility, GMS Inc is 1.48 times less risky than Cedar Realty. The stock trades about -0.24 of its potential returns per unit of risk. The Cedar Realty Trust is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,630  in Cedar Realty Trust on September 17, 2024 and sell it today you would earn a total of  42.00  from holding Cedar Realty Trust or generate 2.58% return on investment over 90 days.

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

GMS Inc  vs.  Cedar Realty Trust

GMS Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GMS Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Cedar Realty Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cedar Realty Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat sluggish basic indicators, Cedar Realty may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GMS and Cedar Realty

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

The idea behind GMS Inc and Cedar Realty Trust 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.