Correlation Between GMS and Aspen Aerogels
Can any of the company-specific risk be diversified away by investing in both GMS and Aspen Aerogels 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 GMS and Aspen Aerogels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and Aspen Aerogels, you can compare the effects of market volatilities on GMS and Aspen Aerogels 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 GMS with a short position of Aspen Aerogels. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and Aspen Aerogels.
Diversification Opportunities for GMS and Aspen Aerogels
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GMS and Aspen is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Aspen Aerogels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aspen Aerogels and GMS 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 GMS Inc are associated (or correlated) with Aspen Aerogels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aspen Aerogels has no effect on the direction of GMS i.e., GMS and Aspen Aerogels go up and down completely randomly.
Pair Corralation between GMS and Aspen Aerogels
Considering the 90-day investment horizon GMS Inc is expected to generate 0.35 times more return on investment than Aspen Aerogels. However, GMS Inc is 2.84 times less risky than Aspen Aerogels. It trades about 0.14 of its potential returns per unit of risk. Aspen Aerogels is currently generating about -0.2 per unit of risk. If you would invest 8,679 in GMS Inc on August 30, 2024 and sell it today you would earn a total of 1,343 from holding GMS Inc or generate 15.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GMS Inc vs. Aspen Aerogels
Performance |
| Timeline |
| GMS Inc |
| Aspen Aerogels |
GMS and Aspen Aerogels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMS and Aspen Aerogels
The main advantage of trading using opposite GMS and Aspen Aerogels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, Aspen Aerogels 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 Aspen Aerogels will offset losses from the drop in Aspen Aerogels' long position.| GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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