Correlation Between Oatly Group and GMS

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

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

Diversification Opportunities for Oatly Group and GMS

-0.71

Correlation Coefficient

Oatly Group  GMS

Pay attention - limited upside

The 3 months correlation between Oatly and GMS is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Oatly Group AB and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc and Oatly Group 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 Oatly Group AB 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 Oatly Group i.e., Oatly Group and GMS go up and down completely randomly.

Pair Corralation between Oatly Group and GMS

Given the investment horizon of 90 days Oatly Group AB is expected to under-perform the GMS. In addition to that, Oatly Group is 1.88 times more volatile than GMS Inc. It trades about -0.05 of its total potential returns per unit of risk. GMS Inc is currently generating about 0.06 per unit of volatility. If you would invest  8,936  in GMS Inc on September 5, 2024 and sell it today you would earn a total of  1,332  from holding GMS Inc or generate 14.91% return on investment over 90 days.

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

Oatly Group AB  vs.  GMS Inc

Oatly Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oatly Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

GMS Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GMS Inc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, GMS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Oatly Group and GMS

The main advantage of trading using opposite Oatly Group and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oatly Group 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 Oatly Group AB 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.