Correlation Between GMS and RAYTHEON

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

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

Diversification Opportunities for GMS and RAYTHEON

0.29

Correlation Coefficient

GMS  RAYTHEON

Modest diversification

The 3 months correlation between GMS and RAYTHEON is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and RAYTHEON TECHNOLOGIES PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RAYTHEON TECHNOLOGIES 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 RAYTHEON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RAYTHEON TECHNOLOGIES has no effect on the direction of GMS i.e., GMS and RAYTHEON go up and down completely randomly.

Pair Corralation between GMS and RAYTHEON

Considering the 90-day investment horizon GMS Inc is expected to under-perform the RAYTHEON. But the stock apears to be less risky and, when comparing its historical volatility, GMS Inc is 3.12 times less risky than RAYTHEON. The stock trades about -0.75 of its potential returns per unit of risk. The RAYTHEON TECHNOLOGIES PORATION is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6,383  in RAYTHEON TECHNOLOGIES PORATION on October 12, 2024 and sell it today you would earn a total of  185.00  from holding RAYTHEON TECHNOLOGIES PORATION or generate 2.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	85.0%
Values	Daily Returns

GMS Inc  vs.  RAYTHEON TECHNOLOGIES PORATION

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

RAYTHEON TECHNOLOGIES

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind GMS Inc and RAYTHEON TECHNOLOGIES PORATION 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.