Correlation Between GMS and Armstrong World
Can any of the company-specific risk be diversified away by investing in both GMS and Armstrong World 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 Armstrong World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and Armstrong World Industries, you can compare the effects of market volatilities on GMS and Armstrong World 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 Armstrong World. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and Armstrong World.
Diversification Opportunities for GMS and Armstrong World
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GMS and Armstrong is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Armstrong World Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Armstrong World Indu 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 Armstrong World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Armstrong World Indu has no effect on the direction of GMS i.e., GMS and Armstrong World go up and down completely randomly.
Pair Corralation between GMS and Armstrong World
Considering the 90-day investment horizon GMS is expected to generate 3.1 times less return on investment than Armstrong World. In addition to that, GMS is 1.19 times more volatile than Armstrong World Industries. It trades about 0.07 of its total potential returns per unit of risk. Armstrong World Industries is currently generating about 0.24 per unit of volatility. If you would invest 14,278 in Armstrong World Industries on November 5, 2024 and sell it today you would earn a total of 823.00 from holding Armstrong World Industries or generate 5.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GMS Inc vs. Armstrong World Industries
Performance |
| Timeline |
| GMS Inc |
| Armstrong World Indu |
GMS and Armstrong World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMS and Armstrong World
The main advantage of trading using opposite GMS and Armstrong World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, Armstrong World 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 Armstrong World will offset losses from the drop in Armstrong World's long position.| GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
| Armstrong World vs. Quanex Building Products | Armstrong World vs. Gibraltar Industries | Armstrong World vs. Beacon Roofing Supply | Armstrong World vs. Janus International Group |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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