Correlation Between GMS and Azek
Can any of the company-specific risk be diversified away by investing in both GMS and Azek 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 Azek into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and Azek Company, you can compare the effects of market volatilities on GMS and Azek 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 Azek. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and Azek.
Diversification Opportunities for GMS and Azek
Poor diversification
The 3 months correlation between GMS and Azek is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Azek Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azek Company 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 Azek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azek Company has no effect on the direction of GMS i.e., GMS and Azek go up and down completely randomly.
Pair Corralation between GMS and Azek
Considering the 90-day investment horizon GMS is expected to generate 1.09 times less return on investment than Azek. But when comparing it to its historical volatility, GMS Inc is 1.05 times less risky than Azek. It trades about 0.14 of its potential returns per unit of risk. Azek Company is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 4,680 in Azek Company on August 30, 2024 and sell it today you would earn a total of 546.00 from holding Azek Company or generate 11.67% 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. Azek Company
Performance |
| Timeline |
| GMS Inc |
| Azek Company |
GMS and Azek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMS and Azek
The main advantage of trading using opposite GMS and Azek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, Azek 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 Azek will offset losses from the drop in Azek's long position.| GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
| Azek vs. Louisiana Pacific | Azek vs. Masco | Azek vs. Fortune Brands Innovations | Azek vs. Trane Technologies plc |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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