Correlation Between GMS and Flexible Solutions

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

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

Diversification Opportunities for GMS and Flexible Solutions

-0.08

Correlation Coefficient

GMS  Flexible Solutions

Good diversification

The 3 months correlation between GMS and Flexible is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Flexible Solutions Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexible Solutions 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 Flexible Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexible Solutions has no effect on the direction of GMS i.e., GMS and Flexible Solutions go up and down completely randomly.

Pair Corralation between GMS and Flexible Solutions

Considering the 90-day investment horizon GMS Inc is expected to under-perform the Flexible Solutions. But the stock apears to be less risky and, when comparing its historical volatility, GMS Inc is 4.56 times less risky than Flexible Solutions. The stock trades about -0.09 of its potential returns per unit of risk. The Flexible Solutions International is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  359.00  in Flexible Solutions International on December 27, 2024 and sell it today you would earn a total of  168.00  from holding Flexible Solutions International or generate 46.8% return on investment over 90 days.

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

GMS Inc  vs.  Flexible Solutions Internation

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 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.

Flexible Solutions

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Flexible Solutions International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Flexible Solutions demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GMS and Flexible Solutions

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

The idea behind GMS Inc and Flexible Solutions International 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..