Correlation Between GMS and Black Hills
Can any of the company-specific risk be diversified away by investing in both GMS and Black Hills 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 Black Hills into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and Black Hills, you can compare the effects of market volatilities on GMS and Black Hills 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 Black Hills. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and Black Hills.
Diversification Opportunities for GMS and Black Hills
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GMS and Black is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Black Hills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Hills 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 Black Hills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Hills has no effect on the direction of GMS i.e., GMS and Black Hills go up and down completely randomly.
Pair Corralation between GMS and Black Hills
Considering the 90-day investment horizon GMS Inc is expected to generate 1.35 times more return on investment than Black Hills. However, GMS is 1.35 times more volatile than Black Hills. It trades about 0.08 of its potential returns per unit of risk. Black Hills is currently generating about 0.0 per unit of risk. 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 |
GMS Inc vs. Black Hills
Performance |
| Timeline |
| GMS Inc |
| Black Hills |
GMS and Black Hills Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMS and Black Hills
The main advantage of trading using opposite GMS and Black Hills positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, Black Hills 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 Black Hills will offset losses from the drop in Black Hills' long position.| GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
| Black Hills vs. NorthWestern | Black Hills vs. Avista | Black Hills vs. Otter Tail | Black Hills vs. Companhia Paranaense de |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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