Correlation Between GMS and Douglas Emmett

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

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

Diversification Opportunities for GMS and Douglas Emmett

0.84

Correlation Coefficient

GMS  Douglas Emmett

Very poor diversification

The 3 months correlation between GMS and Douglas is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Douglas Emmett in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Douglas Emmett 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 Douglas Emmett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Douglas Emmett has no effect on the direction of GMS i.e., GMS and Douglas Emmett go up and down completely randomly.

Pair Corralation between GMS and Douglas Emmett

Considering the 90-day investment horizon GMS Inc is expected to under-perform the Douglas Emmett. But the stock apears to be less risky and, when comparing its historical volatility, GMS Inc is 1.35 times less risky than Douglas Emmett. The stock trades about -0.15 of its potential returns per unit of risk. The Douglas Emmett is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  1,847  in Douglas Emmett on December 18, 2024 and sell it today you would lose (247.00) from holding Douglas Emmett or give up 13.37% of portfolio value over 90 days.

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

GMS Inc  vs.  Douglas Emmett

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

Douglas Emmett

Risk-Adjusted Performance

Very Weak

Over the last 90 days Douglas Emmett has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with GMS and Douglas Emmett

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

The idea behind GMS Inc and Douglas Emmett 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.