Correlation Between RAYTHEON and GMS

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

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

Diversification Opportunities for RAYTHEON and GMS

0.31

Correlation Coefficient

RAYTHEON  GMS

Weak diversification

The 3 months correlation between RAYTHEON and GMS is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding RAYTHEON TECHNOLOGIES PORATION and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc and RAYTHEON 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 RAYTHEON TECHNOLOGIES PORATION 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 RAYTHEON i.e., RAYTHEON and GMS go up and down completely randomly.

Pair Corralation between RAYTHEON and GMS

Assuming the 90 days trading horizon RAYTHEON TECHNOLOGIES PORATION is expected to generate 1.17 times more return on investment than GMS. However, RAYTHEON is 1.17 times more volatile than GMS Inc. It trades about 0.03 of its potential returns per unit of risk. GMS Inc is currently generating about -0.14 per unit of risk. If you would invest  6,595  in RAYTHEON TECHNOLOGIES PORATION on October 13, 2024 and sell it today you would earn a total of  114.00  from holding RAYTHEON TECHNOLOGIES PORATION or generate 1.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	85.25%
Values	Daily Returns

RAYTHEON TECHNOLOGIES PORATION  vs.  GMS Inc

RAYTHEON TECHNOLOGIES

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RAYTHEON TECHNOLOGIES PORATION are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, RAYTHEON is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

GMS Inc

Risk-Adjusted Performance

0 of 100

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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with RAYTHEON and GMS

The main advantage of trading using opposite RAYTHEON and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RAYTHEON 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 RAYTHEON TECHNOLOGIES PORATION 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.