Correlation Between GMS and Drilling Tools
Can any of the company-specific risk be diversified away by investing in both GMS and Drilling Tools 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 Drilling Tools into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and Drilling Tools International, you can compare the effects of market volatilities on GMS and Drilling Tools 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 Drilling Tools. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and Drilling Tools.
Diversification Opportunities for GMS and Drilling Tools
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GMS and Drilling is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Drilling Tools International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Drilling Tools Inter 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 Drilling Tools. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Drilling Tools Inter has no effect on the direction of GMS i.e., GMS and Drilling Tools go up and down completely randomly.
Pair Corralation between GMS and Drilling Tools
Considering the 90-day investment horizon GMS Inc is expected to generate 0.47 times more return on investment than Drilling Tools. However, GMS Inc is 2.14 times less risky than Drilling Tools. It trades about 0.06 of its potential returns per unit of risk. Drilling Tools International is currently generating about -0.02 per unit of risk. If you would invest 6,867 in GMS Inc on August 31, 2024 and sell it today you would earn a total of 3,168 from holding GMS Inc or generate 46.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GMS Inc vs. Drilling Tools International
Performance |
| Timeline |
| GMS Inc |
| Drilling Tools Inter |
GMS and Drilling Tools Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMS and Drilling Tools
The main advantage of trading using opposite GMS and Drilling Tools positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, Drilling Tools 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 Drilling Tools will offset losses from the drop in Drilling Tools' long position.| GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
| Drilling Tools vs. Digi International | Drilling Tools vs. Cleantech Power Corp | Drilling Tools vs. WiMi Hologram Cloud | Drilling Tools vs. Verde Clean Fuels |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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