Correlation Between Azek and GMS
Can any of the company-specific risk be diversified away by investing in both Azek 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 Azek and GMS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Azek Company and GMS Inc, you can compare the effects of market volatilities on Azek 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 Azek with a short position of GMS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Azek and GMS.
Diversification Opportunities for Azek and GMS
Modest diversification
The 3 months correlation between Azek and GMS is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Azek Company and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc and Azek 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 Azek Company 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 Azek i.e., Azek and GMS go up and down completely randomly.
Pair Corralation between Azek and GMS
Given the investment horizon of 90 days Azek Company is expected to generate 1.51 times more return on investment than GMS. However, Azek is 1.51 times more volatile than GMS Inc. It trades about 0.25 of its potential returns per unit of risk. GMS Inc is currently generating about 0.09 per unit of risk. If you would invest 4,709 in Azek Company on November 2, 2024 and sell it today you would earn a total of 491.00 from holding Azek Company or generate 10.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Azek Company vs. GMS Inc
Performance |
| Timeline |
| Azek Company |
| GMS Inc |
Azek and GMS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Azek and GMS
The main advantage of trading using opposite Azek and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Azek 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.| Azek vs. Louisiana Pacific | Azek vs. Masco | Azek vs. Fortune Brands Innovations | Azek vs. Trane Technologies plc |
| 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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