Correlation Between GMS and CEZ A
Can any of the company-specific risk be diversified away by investing in both GMS and CEZ A 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 CEZ A into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and CEZ A S, you can compare the effects of market volatilities on GMS and CEZ A 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 CEZ A. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and CEZ A.
Diversification Opportunities for GMS and CEZ A
Very good diversification
The 3 months correlation between GMS and CEZ is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and CEZ A S in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CEZ A S 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 CEZ A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CEZ A S has no effect on the direction of GMS i.e., GMS and CEZ A go up and down completely randomly.
Pair Corralation between GMS and CEZ A
Considering the 90-day investment horizon GMS Inc is expected to generate 1.25 times more return on investment than CEZ A. However, GMS is 1.25 times more volatile than CEZ A S. It trades about 0.09 of its potential returns per unit of risk. CEZ A S is currently generating about -0.08 per unit of risk. If you would invest 6,988 in GMS Inc on September 2, 2024 and sell it today you would earn a total of 3,047 from holding GMS Inc or generate 43.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 56.05% |
| Values | Daily Returns |
GMS Inc vs. CEZ A S
Performance |
| Timeline |
| GMS Inc |
| CEZ A S |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GMS and CEZ A Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMS and CEZ A
The main advantage of trading using opposite GMS and CEZ A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, CEZ A 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 CEZ A will offset losses from the drop in CEZ A's long position.| GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
| CEZ A vs. SEI Investments | CEZ A vs. FiscalNote Holdings | CEZ A vs. Dave Busters Entertainment | CEZ A vs. CT Real Estate |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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