Correlation Between GMS and NISOURCE

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

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

Diversification Opportunities for GMS and NISOURCE

0.12

Correlation Coefficient

GMS  NISOURCE

Average diversification

The 3 months correlation between GMS and NISOURCE is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and NISOURCE INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NISOURCE INC 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 NISOURCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NISOURCE INC has no effect on the direction of GMS i.e., GMS and NISOURCE go up and down completely randomly.

Pair Corralation between GMS and NISOURCE

Considering the 90-day investment horizon GMS Inc is expected to under-perform the NISOURCE. In addition to that, GMS is 1.9 times more volatile than NISOURCE INC. It trades about -0.12 of its total potential returns per unit of risk. NISOURCE INC is currently generating about -0.08 per unit of volatility. If you would invest  9,143  in NISOURCE INC on December 25, 2024 and sell it today you would lose (411.00) from holding NISOURCE INC or give up 4.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.92%
Values	Daily Returns

GMS Inc  vs.  NISOURCE INC

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 weak performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

NISOURCE INC

Risk-Adjusted Performance

Very Weak

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

Pair Trading with GMS and NISOURCE

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

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