Correlation Between GMS and Ecolab

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

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

Diversification Opportunities for GMS and Ecolab

0.0

Correlation Coefficient

GMS  Ecolab

Pay attention - limited upside

The 3 months correlation between GMS and Ecolab is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab Inc 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 Ecolab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecolab Inc has no effect on the direction of GMS i.e., GMS and Ecolab go up and down completely randomly.

Pair Corralation between GMS and Ecolab

Considering the 90-day investment horizon GMS Inc is expected to under-perform the Ecolab. In addition to that, GMS is 1.51 times more volatile than Ecolab Inc. It trades about -0.51 of its total potential returns per unit of risk. Ecolab Inc is currently generating about -0.17 per unit of volatility. If you would invest  24,705  in Ecolab Inc on September 28, 2024 and sell it today you would lose (929.00) from holding Ecolab Inc or give up 3.76% of portfolio value over 90 days.

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

GMS Inc  vs.  Ecolab Inc

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.

Ecolab Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ecolab Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with GMS and Ecolab

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

The idea behind GMS Inc and Ecolab Inc 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.