Correlation Between GMS and HONEYWELL

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

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

Diversification Opportunities for GMS and HONEYWELL

0.5

Correlation Coefficient

GMS  HONEYWELL

Very weak diversification

The 3 months correlation between GMS and HONEYWELL is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and HONEYWELL INTERNATIONAL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HONEYWELL INTERNATIONAL 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 HONEYWELL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HONEYWELL INTERNATIONAL has no effect on the direction of GMS i.e., GMS and HONEYWELL go up and down completely randomly.

Pair Corralation between GMS and HONEYWELL

Considering the 90-day investment horizon GMS Inc is expected to under-perform the HONEYWELL. In addition to that, GMS is 2.56 times more volatile than HONEYWELL INTERNATIONAL INC. It trades about -0.08 of its total potential returns per unit of risk. HONEYWELL INTERNATIONAL INC is currently generating about -0.14 per unit of volatility. If you would invest  9,255  in HONEYWELL INTERNATIONAL INC on October 26, 2024 and sell it today you would lose (537.00) from holding HONEYWELL INTERNATIONAL INC or give up 5.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.72%
Values	Daily Returns

GMS Inc  vs.  HONEYWELL INTERNATIONAL INC

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.

HONEYWELL INTERNATIONAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HONEYWELL INTERNATIONAL INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HONEYWELL 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 HONEYWELL

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

The idea behind GMS Inc and HONEYWELL INTERNATIONAL INC 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.