Correlation Between 40434LAB1 and GMS

Can any of the company-specific risk be diversified away by investing in both 40434LAB1 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 40434LAB1 and GMS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HP INC and GMS Inc, you can compare the effects of market volatilities on 40434LAB1 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 40434LAB1 with a short position of GMS. Check out your portfolio center. Please also check ongoing floating volatility patterns of 40434LAB1 and GMS.

Diversification Opportunities for 40434LAB1 and GMS

-0.15

Correlation Coefficient

40434LAB1  GMS

Good diversification

The 3 months correlation between 40434LAB1 and GMS is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding HP INC and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc and 40434LAB1 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 HP INC 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 40434LAB1 i.e., 40434LAB1 and GMS go up and down completely randomly.

Pair Corralation between 40434LAB1 and GMS

Assuming the 90 days trading horizon HP INC is expected to under-perform the GMS. But the bond apears to be less risky and, when comparing its historical volatility, HP INC is 2.36 times less risky than GMS. The bond trades about -0.14 of its potential returns per unit of risk. The GMS Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  8,917  in GMS Inc on September 16, 2024 and sell it today you would earn a total of  183.00  from holding GMS Inc or generate 2.05% return on investment over 90 days.

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

HP INC  vs.  GMS Inc

40434LAB1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HP INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for HP INC investors.

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 40434LAB1 and GMS

The main advantage of trading using opposite 40434LAB1 and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 40434LAB1 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 HP INC 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.