Correlation Between GMS and ALLSTATE

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

By analyzing existing cross correlation between GMS Inc and ALLSTATE P 45, you can compare the effects of market volatilities on GMS and ALLSTATE 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 ALLSTATE. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and ALLSTATE.

Diversification Opportunities for GMS and ALLSTATE

0.31

Correlation Coefficient

GMS  ALLSTATE

Weak diversification

The 3 months correlation between GMS and ALLSTATE is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and ALLSTATE P 45 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALLSTATE P 45 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 ALLSTATE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALLSTATE P 45 has no effect on the direction of GMS i.e., GMS and ALLSTATE go up and down completely randomly.

Pair Corralation between GMS and ALLSTATE

Considering the 90-day investment horizon GMS Inc is expected to under-perform the ALLSTATE. In addition to that, GMS is 1.18 times more volatile than ALLSTATE P 45. It trades about -0.25 of its total potential returns per unit of risk. ALLSTATE P 45 is currently generating about -0.13 per unit of volatility. If you would invest  8,838  in ALLSTATE P 45 on October 7, 2024 and sell it today you would lose (396.00) from holding ALLSTATE P 45 or give up 4.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	60.98%
Values	Daily Returns

GMS Inc  vs.  ALLSTATE P 45

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.

ALLSTATE P 45

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALLSTATE P 45 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for ALLSTATE P 45 investors.

Pair Trading with GMS and ALLSTATE

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

The idea behind GMS Inc and ALLSTATE P 45 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.