Correlation Between GMS and Envista Holdings

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

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

Diversification Opportunities for GMS and Envista Holdings

0.72

Correlation Coefficient

GMS  Envista Holdings

Poor diversification

The 3 months correlation between GMS and Envista is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Envista Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Envista Holdings Corp 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 Envista Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Envista Holdings Corp has no effect on the direction of GMS i.e., GMS and Envista Holdings go up and down completely randomly.

Pair Corralation between GMS and Envista Holdings

Considering the 90-day investment horizon GMS Inc is expected to under-perform the Envista Holdings. But the stock apears to be less risky and, when comparing its historical volatility, GMS Inc is 1.43 times less risky than Envista Holdings. The stock trades about -0.03 of its potential returns per unit of risk. The Envista Holdings Corp is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  1,880  in Envista Holdings Corp on October 24, 2024 and sell it today you would earn a total of  225.00  from holding Envista Holdings Corp or generate 11.97% return on investment over 90 days.

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

GMS Inc  vs.  Envista Holdings Corp

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.

Envista Holdings Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Envista Holdings Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Envista Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GMS and Envista Holdings

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

The idea behind GMS Inc and Envista Holdings Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.