Correlation Between 404280AM1 and GMS

Can any of the company-specific risk be diversified away by investing in both 404280AM1 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 404280AM1 and GMS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HSBC HLDGS PLC and GMS Inc, you can compare the effects of market volatilities on 404280AM1 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 404280AM1 with a short position of GMS. Check out your portfolio center. Please also check ongoing floating volatility patterns of 404280AM1 and GMS.

Diversification Opportunities for 404280AM1 and GMS

0.01

Correlation Coefficient

404280AM1  GMS

Significant diversification

The 3 months correlation between 404280AM1 and GMS is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding HSBC HLDGS PLC and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc and 404280AM1 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 HSBC HLDGS PLC 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 404280AM1 i.e., 404280AM1 and GMS go up and down completely randomly.

Pair Corralation between 404280AM1 and GMS

Assuming the 90 days trading horizon HSBC HLDGS PLC is expected to generate 0.45 times more return on investment than GMS. However, HSBC HLDGS PLC is 2.23 times less risky than GMS. It trades about 0.02 of its potential returns per unit of risk. GMS Inc is currently generating about -0.12 per unit of risk. If you would invest  10,671  in HSBC HLDGS PLC on December 30, 2024 and sell it today you would earn a total of  75.00  from holding HSBC HLDGS PLC or generate 0.7% return on investment over 90 days.

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

HSBC HLDGS PLC  vs.  GMS Inc

HSBC HLDGS PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC HLDGS PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 404280AM1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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 404280AM1 and GMS

The main advantage of trading using opposite 404280AM1 and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 404280AM1 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 HSBC HLDGS PLC 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.