Correlation Between GMS and Latham

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

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

Diversification Opportunities for GMS and Latham

0.14

Correlation Coefficient

GMS  Latham

Average diversification

The 3 months correlation between GMS and Latham is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Latham Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Latham Group 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 Latham. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Latham Group has no effect on the direction of GMS i.e., GMS and Latham go up and down completely randomly.

Pair Corralation between GMS and Latham

Considering the 90-day investment horizon GMS Inc is expected to under-perform the Latham. But the stock apears to be less risky and, when comparing its historical volatility, GMS Inc is 3.21 times less risky than Latham. The stock trades about -0.09 of its potential returns per unit of risk. The Latham Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  700.00  in Latham Group on December 27, 2024 and sell it today you would lose (4.00) from holding Latham Group or give up 0.57% of portfolio value over 90 days.

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

GMS Inc  vs.  Latham Group

GMS Inc

Risk-Adjusted Performance

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.

Latham Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Latham Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent forward indicators, Latham may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with GMS and Latham

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

The idea behind GMS Inc and Latham Group 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.