Correlation Between GMS and Borealis Foods
Can any of the company-specific risk be diversified away by investing in both GMS and Borealis Foods 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 Borealis Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and Borealis Foods, you can compare the effects of market volatilities on GMS and Borealis Foods 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 Borealis Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and Borealis Foods.
Diversification Opportunities for GMS and Borealis Foods
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GMS and Borealis is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Borealis Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Borealis Foods 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 Borealis Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Borealis Foods has no effect on the direction of GMS i.e., GMS and Borealis Foods go up and down completely randomly.
Pair Corralation between GMS and Borealis Foods
Considering the 90-day investment horizon GMS is expected to generate 2.18 times less return on investment than Borealis Foods. But when comparing it to its historical volatility, GMS Inc is 4.3 times less risky than Borealis Foods. It trades about 0.24 of its potential returns per unit of risk. Borealis Foods is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 6.11 in Borealis Foods on September 3, 2024 and sell it today you would earn a total of 0.89 from holding Borealis Foods or generate 14.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
GMS Inc vs. Borealis Foods
Performance |
| Timeline |
| GMS Inc |
| Borealis Foods |
GMS and Borealis Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMS and Borealis Foods
The main advantage of trading using opposite GMS and Borealis Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, Borealis Foods 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 Borealis Foods will offset losses from the drop in Borealis Foods' 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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