Correlation Between Stagwell and GMS

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

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

Diversification Opportunities for Stagwell and GMS

0.85

Correlation Coefficient

Stagwell  GMS

Very poor diversification

The 3 months correlation between Stagwell and GMS is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Stagwell and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc and Stagwell 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 Stagwell 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 Stagwell i.e., Stagwell and GMS go up and down completely randomly.

Pair Corralation between Stagwell and GMS

Given the investment horizon of 90 days Stagwell is expected to generate 1.43 times more return on investment than GMS. However, Stagwell is 1.43 times more volatile than GMS Inc. It trades about -0.09 of its potential returns per unit of risk. GMS Inc is currently generating about -0.15 per unit of risk. If you would invest  694.00  in Stagwell on December 18, 2024 and sell it today you would lose (92.00) from holding Stagwell or give up 13.26% of portfolio value over 90 days.

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

Stagwell  vs.  GMS Inc

Stagwell

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stagwell has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated 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 April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Stagwell and GMS

The main advantage of trading using opposite Stagwell and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stagwell 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 Stagwell 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.