Correlation Between GMS and Dow Jones
Can any of the company-specific risk be diversified away by investing in both GMS and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and Dow Jones Industrial, you can compare the effects of market volatilities on GMS and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and Dow Jones.
Diversification Opportunities for GMS and Dow Jones
Poor diversification
The 3 months correlation between GMS and Dow is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of GMS i.e., GMS and Dow Jones go up and down completely randomly.
Pair Corralation between GMS and Dow Jones
Considering the 90-day investment horizon GMS is expected to generate 1.27 times less return on investment than Dow Jones. In addition to that, GMS is 2.5 times more volatile than Dow Jones Industrial. It trades about 0.04 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.13 per unit of volatility. If you would invest 4,124,052 in Dow Jones Industrial on August 24, 2024 and sell it today you would earn a total of 262,983 from holding Dow Jones Industrial or generate 6.38% 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. Dow Jones Industrial
Performance |
| Timeline |
GMS and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
GMS Inc
Pair trading matchups for GMS
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with GMS and Dow Jones
The main advantage of trading using opposite GMS and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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