Correlation Between GMS and Century Aluminum
Can any of the company-specific risk be diversified away by investing in both GMS and Century Aluminum 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 Century Aluminum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and Century Aluminum, you can compare the effects of market volatilities on GMS and Century Aluminum 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 Century Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and Century Aluminum.
Diversification Opportunities for GMS and Century Aluminum
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GMS and Century is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Century Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Aluminum 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 Century Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Aluminum has no effect on the direction of GMS i.e., GMS and Century Aluminum go up and down completely randomly.
Pair Corralation between GMS and Century Aluminum
Considering the 90-day investment horizon GMS Inc is expected to under-perform the Century Aluminum. But the stock apears to be less risky and, when comparing its historical volatility, GMS Inc is 1.7 times less risky than Century Aluminum. The stock trades about -0.24 of its potential returns per unit of risk. The Century Aluminum is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,119 in Century Aluminum on September 13, 2024 and sell it today you would earn a total of 23.00 from holding Century Aluminum or generate 1.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
GMS Inc vs. Century Aluminum
Performance |
| Timeline |
| GMS Inc |
| Century Aluminum |
GMS and Century Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMS and Century Aluminum
The main advantage of trading using opposite GMS and Century Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, Century Aluminum 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 Century Aluminum will offset losses from the drop in Century Aluminum's long position.| GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
| Century Aluminum vs. Kaiser Aluminum | Century Aluminum vs. Commercial Metals | Century Aluminum vs. Steel Dynamics | Century Aluminum vs. Reliance Steel Aluminum |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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