Correlation Between Brunswick and GMS
Can any of the company-specific risk be diversified away by investing in both Brunswick 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 Brunswick and GMS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brunswick and GMS Inc, you can compare the effects of market volatilities on Brunswick 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 Brunswick with a short position of GMS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brunswick and GMS.
Diversification Opportunities for Brunswick and GMS
Poor diversification
The 3 months correlation between Brunswick and GMS is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Brunswick and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc and Brunswick 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 Brunswick 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 Brunswick i.e., Brunswick and GMS go up and down completely randomly.
Pair Corralation between Brunswick and GMS
Allowing for the 90-day total investment horizon Brunswick is expected to generate 2.73 times less return on investment than GMS. In addition to that, Brunswick is 1.18 times more volatile than GMS Inc. It trades about 0.03 of its total potential returns per unit of risk. GMS Inc is currently generating about 0.11 per unit of volatility. If you would invest 6,212 in GMS Inc on September 1, 2024 and sell it today you would earn a total of 3,823 from holding GMS Inc or generate 61.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brunswick vs. GMS Inc
Performance |
| Timeline |
| Brunswick |
| GMS Inc |
Brunswick and GMS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brunswick and GMS
The main advantage of trading using opposite Brunswick and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brunswick 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.| Brunswick vs. LCI Industries | Brunswick vs. MCBC Holdings | Brunswick vs. Winnebago Industries | Brunswick vs. Thor 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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