Correlation Between GMS and Goldenstone Acquisition

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

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

Diversification Opportunities for GMS and Goldenstone Acquisition

-0.41

Correlation Coefficient

GMS  Goldenstone Acquisition

Very good diversification

The 3 months correlation between GMS and Goldenstone is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Goldenstone Acquisition Limite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldenstone Acquisition 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 Goldenstone Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldenstone Acquisition has no effect on the direction of GMS i.e., GMS and Goldenstone Acquisition go up and down completely randomly.

Pair Corralation between GMS and Goldenstone Acquisition

Considering the 90-day investment horizon GMS is expected to generate 22.72 times less return on investment than Goldenstone Acquisition. But when comparing it to its historical volatility, GMS Inc is 19.23 times less risky than Goldenstone Acquisition. It trades about 0.04 of its potential returns per unit of risk. Goldenstone Acquisition Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3.37  in Goldenstone Acquisition Limited on September 14, 2024 and sell it today you would lose (1.36) from holding Goldenstone Acquisition Limited or give up 40.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	23.81%
Values	Daily Returns

GMS Inc  vs.  Goldenstone Acquisition Limite

GMS Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GMS Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Goldenstone Acquisition

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Goldenstone Acquisition Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly uncertain basic indicators, Goldenstone Acquisition showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GMS and Goldenstone Acquisition

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

The idea behind GMS Inc and Goldenstone Acquisition Limited 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.