Correlation Between Alpha Pro and GMS
Can any of the company-specific risk be diversified away by investing in both Alpha Pro 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 Alpha Pro and GMS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alpha Pro Tech and GMS Inc, you can compare the effects of market volatilities on Alpha Pro 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 Alpha Pro with a short position of GMS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpha Pro and GMS.
Diversification Opportunities for Alpha Pro and GMS
Very good diversification
The 3 months correlation between Alpha and GMS is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Pro Tech and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc and Alpha Pro 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 Alpha Pro Tech 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 Alpha Pro i.e., Alpha Pro and GMS go up and down completely randomly.
Pair Corralation between Alpha Pro and GMS
Considering the 90-day investment horizon Alpha Pro Tech is expected to under-perform the GMS. But the stock apears to be less risky and, when comparing its historical volatility, Alpha Pro Tech is 1.05 times less risky than GMS. The stock trades about -0.13 of its potential returns per unit of risk. The GMS Inc is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 8,995 in GMS Inc on August 30, 2024 and sell it today you would earn a total of 1,027 from holding GMS Inc or generate 11.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Alpha Pro Tech vs. GMS Inc
Performance |
| Timeline |
| Alpha Pro Tech |
| GMS Inc |
Alpha Pro and GMS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alpha Pro and GMS
The main advantage of trading using opposite Alpha Pro and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alpha Pro 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.| Alpha Pro vs. Trex Company | Alpha Pro vs. Quanex Building Products | Alpha Pro vs. Armstrong World Industries | Alpha Pro vs. Gibraltar Industries |
| GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
Check out your portfolio center.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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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