Correlation Between GMS and Kenvue

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

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

Diversification Opportunities for GMS and Kenvue

0.9

Correlation Coefficient

GMS  Kenvue

Almost no diversification

The 3 months correlation between GMS and Kenvue is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Kenvue Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kenvue 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 Kenvue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kenvue Inc has no effect on the direction of GMS i.e., GMS and Kenvue go up and down completely randomly.

Pair Corralation between GMS and Kenvue

Considering the 90-day investment horizon GMS Inc is expected to generate 1.14 times more return on investment than Kenvue. However, GMS is 1.14 times more volatile than Kenvue Inc. It trades about 0.04 of its potential returns per unit of risk. Kenvue Inc is currently generating about -0.02 per unit of risk. If you would invest  6,104  in GMS Inc on October 25, 2024 and sell it today you would earn a total of  2,283  from holding GMS Inc or generate 37.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	87.45%
Values	Daily Returns

GMS Inc  vs.  Kenvue 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 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.

Kenvue Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kenvue Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with GMS and Kenvue

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

The idea behind GMS Inc and Kenvue 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.

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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.