Correlation Between GMS and KINDER

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

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

Diversification Opportunities for GMS and KINDER

0.48

Correlation Coefficient

GMS  KINDER

Very weak diversification

The 3 months correlation between GMS and KINDER is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and KINDER MORGAN ENERGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KINDER MORGAN ENERGY 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 KINDER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KINDER MORGAN ENERGY has no effect on the direction of GMS i.e., GMS and KINDER go up and down completely randomly.

Pair Corralation between GMS and KINDER

Considering the 90-day investment horizon GMS Inc is expected to under-perform the KINDER. In addition to that, GMS is 3.5 times more volatile than KINDER MORGAN ENERGY. It trades about -0.25 of its total potential returns per unit of risk. KINDER MORGAN ENERGY is currently generating about -0.1 per unit of volatility. If you would invest  11,301  in KINDER MORGAN ENERGY on October 7, 2024 and sell it today you would lose (188.00) from holding KINDER MORGAN ENERGY or give up 1.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.12%
Values	Daily Returns

GMS Inc  vs.  KINDER MORGAN ENERGY

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.

KINDER MORGAN ENERGY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KINDER MORGAN ENERGY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KINDER is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GMS and KINDER

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

The idea behind GMS Inc and KINDER MORGAN ENERGY 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.

Check out your portfolio center.

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 Global Correlations module to find global opportunities by holding instruments from different markets.