Correlation Between GMS and Minerals Technologies

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

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

Diversification Opportunities for GMS and Minerals Technologies

0.81

Correlation Coefficient

GMS  Minerals Technologies

Very poor diversification

The 3 months correlation between GMS and Minerals is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Minerals Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Minerals Technologies 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 Minerals Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Minerals Technologies has no effect on the direction of GMS i.e., GMS and Minerals Technologies go up and down completely randomly.

Pair Corralation between GMS and Minerals Technologies

Considering the 90-day investment horizon GMS Inc is expected to under-perform the Minerals Technologies. In addition to that, GMS is 1.16 times more volatile than Minerals Technologies. It trades about -0.52 of its total potential returns per unit of risk. Minerals Technologies is currently generating about -0.33 per unit of volatility. If you would invest  8,460  in Minerals Technologies on September 25, 2024 and sell it today you would lose (787.00) from holding Minerals Technologies or give up 9.3% of portfolio value over 90 days.

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

GMS Inc  vs.  Minerals Technologies

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.

Minerals Technologies

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Minerals Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Minerals Technologies is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GMS and Minerals Technologies

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

The idea behind GMS Inc and Minerals Technologies 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.