Correlation Between GMS and Dividend

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

By analyzing existing cross correlation between GMS Inc and Dividend 15 Split, you can compare the effects of market volatilities on GMS and Dividend 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 Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and Dividend.

Diversification Opportunities for GMS and Dividend

-0.54

Correlation Coefficient

GMS  Dividend

Excellent diversification

The 3 months correlation between GMS and Dividend is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Dividend 15 Split in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dividend 15 Split 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 Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dividend 15 Split has no effect on the direction of GMS i.e., GMS and Dividend go up and down completely randomly.

Pair Corralation between GMS and Dividend

Considering the 90-day investment horizon GMS Inc is expected to under-perform the Dividend. In addition to that, GMS is 2.83 times more volatile than Dividend 15 Split. It trades about -0.05 of its total potential returns per unit of risk. Dividend 15 Split is currently generating about 0.22 per unit of volatility. If you would invest  329.00  in Dividend 15 Split on October 23, 2024 and sell it today you would earn a total of  29.00  from holding Dividend 15 Split or generate 8.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

GMS Inc  vs.  Dividend 15 Split

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.

Dividend 15 Split

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dividend 15 Split are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Dividend may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with GMS and Dividend

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

The idea behind GMS Inc and Dividend 15 Split 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.