Correlation Between GMS and U1566PAD7

Can any of the company-specific risk be diversified away by investing in both GMS and U1566PAD7 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 U1566PAD7 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GMS Inc and LUMN 45 15 JAN 29, you can compare the effects of market volatilities on GMS and U1566PAD7 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 U1566PAD7. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and U1566PAD7.

Diversification Opportunities for GMS and U1566PAD7

0.39

Correlation Coefficient

GMS  U1566PAD7

Weak diversification

The 3 months correlation between GMS and U1566PAD7 is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and LUMN 45 15 JAN 29 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LUMN 45 15 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 U1566PAD7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LUMN 45 15 has no effect on the direction of GMS i.e., GMS and U1566PAD7 go up and down completely randomly.

Pair Corralation between GMS and U1566PAD7

Considering the 90-day investment horizon GMS Inc is expected to generate 0.21 times more return on investment than U1566PAD7. However, GMS Inc is 4.83 times less risky than U1566PAD7. It trades about -0.45 of its potential returns per unit of risk. LUMN 45 15 JAN 29 is currently generating about -0.31 per unit of risk. If you would invest  10,048  in GMS Inc on September 27, 2024 and sell it today you would lose (1,409) from holding GMS Inc or give up 14.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	40.91%
Values	Daily Returns

GMS Inc  vs.  LUMN 45 15 JAN 29

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 comparatively stable primary indicators, GMS is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

LUMN 45 15

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LUMN 45 15 JAN 29 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, U1566PAD7 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 U1566PAD7

The main advantage of trading using opposite GMS and U1566PAD7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, U1566PAD7 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 U1566PAD7 will offset losses from the drop in U1566PAD7's long position.

The idea behind GMS Inc and LUMN 45 15 JAN 29 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.