Correlation Between GMS and Columbia Sportswear

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

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

Diversification Opportunities for GMS and Columbia Sportswear

0.17

Correlation Coefficient

GMS  Columbia Sportswear

Average diversification

The 3 months correlation between GMS and Columbia is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Columbia Sportswear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Sportswear 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 Columbia Sportswear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Sportswear has no effect on the direction of GMS i.e., GMS and Columbia Sportswear go up and down completely randomly.

Pair Corralation between GMS and Columbia Sportswear

Considering the 90-day investment horizon GMS Inc is expected to under-perform the Columbia Sportswear. In addition to that, GMS is 1.04 times more volatile than Columbia Sportswear. It trades about -0.06 of its total potential returns per unit of risk. Columbia Sportswear is currently generating about 0.04 per unit of volatility. If you would invest  7,977  in Columbia Sportswear on October 7, 2024 and sell it today you would earn a total of  290.00  from holding Columbia Sportswear or generate 3.64% return on investment over 90 days.

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

GMS Inc  vs.  Columbia Sportswear

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 latest weak performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Columbia Sportswear

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Sportswear are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Columbia Sportswear is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with GMS and Columbia Sportswear

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

The idea behind GMS Inc and Columbia Sportswear 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.