Correlation Between Installed Building and GMS

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

By analyzing existing cross correlation between Installed Building Products and GMS Inc, you can compare the effects of market volatilities on Installed Building and GMS 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 Installed Building with a short position of GMS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Installed Building and GMS.

Diversification Opportunities for Installed Building and GMS

0.83

Correlation Coefficient

Installed Building  GMS

Very poor diversification

The 3 months correlation between Installed and GMS is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Installed Building Products and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc and Installed Building 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 Installed Building Products are associated (or correlated) with GMS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMS Inc has no effect on the direction of Installed Building i.e., Installed Building and GMS go up and down completely randomly.

Pair Corralation between Installed Building and GMS

Considering the 90-day investment horizon Installed Building Products is expected to under-perform the GMS. In addition to that, Installed Building is 1.56 times more volatile than GMS Inc. It trades about -0.19 of its total potential returns per unit of risk. GMS Inc is currently generating about -0.23 per unit of volatility. If you would invest  10,035  in GMS Inc on November 29, 2024 and sell it today you would lose (1,923) from holding GMS Inc or give up 19.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Installed Building Products  vs.  GMS Inc

Installed Building

Risk-Adjusted Performance

Very Weak

Over the last 90 days Installed Building Products has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

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 March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Installed Building and GMS

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

The idea behind Installed Building Products and GMS 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.