Correlation Between Scilex Holding and GMS

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

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

Diversification Opportunities for Scilex Holding and GMS

0.3

Correlation Coefficient

Scilex Holding  GMS

Weak diversification

The 3 months correlation between Scilex and GMS is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Scilex Holding and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc and Scilex Holding 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 Scilex Holding 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 Scilex Holding i.e., Scilex Holding and GMS go up and down completely randomly.

Pair Corralation between Scilex Holding and GMS

Assuming the 90 days horizon Scilex Holding is expected to generate 6.69 times more return on investment than GMS. However, Scilex Holding is 6.69 times more volatile than GMS Inc. It trades about 0.05 of its potential returns per unit of risk. GMS Inc is currently generating about 0.03 per unit of risk. If you would invest  39.00  in Scilex Holding on September 15, 2024 and sell it today you would lose (11.00) from holding Scilex Holding or give up 28.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Scilex Holding  vs.  GMS Inc

Scilex Holding

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Scilex Holding are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Scilex Holding showed solid returns over the last few months and may actually be approaching a breakup point.

GMS Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GMS Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Scilex Holding and GMS

The main advantage of trading using opposite Scilex Holding and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scilex Holding 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 Scilex Holding 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.