Correlation Between GMS and Stagwell

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

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

Diversification Opportunities for GMS and Stagwell

0.82

Correlation Coefficient

GMS  Stagwell

Very poor diversification

The 3 months correlation between GMS and Stagwell is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Stagwell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stagwell 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 Stagwell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stagwell has no effect on the direction of GMS i.e., GMS and Stagwell go up and down completely randomly.

Pair Corralation between GMS and Stagwell

Considering the 90-day investment horizon GMS Inc is expected to generate 0.84 times more return on investment than Stagwell. However, GMS Inc is 1.19 times less risky than Stagwell. It trades about -0.69 of its potential returns per unit of risk. Stagwell is currently generating about -0.7 per unit of risk. If you would invest  9,500  in GMS Inc on October 11, 2024 and sell it today you would lose (1,389) from holding GMS Inc or give up 14.62% 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.  Stagwell

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.

Stagwell

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stagwell has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with GMS and Stagwell

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

The idea behind GMS Inc and Stagwell 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.