Correlation Between Bank of America and GMS
Can any of the company-specific risk be diversified away by investing in both Bank of America 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 Bank of America and GMS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and GMS Inc, you can compare the effects of market volatilities on Bank of America 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 Bank of America with a short position of GMS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and GMS.
Diversification Opportunities for Bank of America and GMS
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and GMS is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc and Bank of America 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 Bank of America 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 Bank of America i.e., Bank of America and GMS go up and down completely randomly.
Pair Corralation between Bank of America and GMS
Assuming the 90 days trading horizon Bank of America is expected to generate 2.26 times less return on investment than GMS. But when comparing it to its historical volatility, Bank of America is 2.58 times less risky than GMS. It trades about 0.09 of its potential returns per unit of risk. GMS Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 5,370 in GMS Inc on September 4, 2024 and sell it today you would earn a total of 4,643 from holding GMS Inc or generate 86.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. GMS Inc
Performance |
| Timeline |
| Bank of America |
| GMS Inc |
Bank of America and GMS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and GMS
The main advantage of trading using opposite Bank of America and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America 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.| Bank of America vs. Wells Fargo | Bank of America vs. Wells Fargo | Bank of America vs. Bank of America | Bank of America vs. Bank of America |
| 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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