Correlation Between GMS and National Vision
Can any of the company-specific risk be diversified away by investing in both GMS and National Vision 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 National Vision into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and National Vision Holdings, you can compare the effects of market volatilities on GMS and National Vision 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 National Vision. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and National Vision.
Diversification Opportunities for GMS and National Vision
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GMS and National is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and National Vision Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Vision Holdings 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 National Vision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Vision Holdings has no effect on the direction of GMS i.e., GMS and National Vision go up and down completely randomly.
Pair Corralation between GMS and National Vision
Considering the 90-day investment horizon GMS Inc is expected to generate 0.55 times more return on investment than National Vision. However, GMS Inc is 1.82 times less risky than National Vision. It trades about 0.06 of its potential returns per unit of risk. National Vision Holdings is currently generating about -0.05 per unit of risk. If you would invest 8,416 in GMS Inc on August 28, 2024 and sell it today you would earn a total of 1,968 from holding GMS Inc or generate 23.38% 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. National Vision Holdings
Performance |
| Timeline |
| GMS Inc |
| National Vision Holdings |
GMS and National Vision Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMS and National Vision
The main advantage of trading using opposite GMS and National Vision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, National Vision 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 National Vision will offset losses from the drop in National Vision's long position.| GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
| National Vision vs. Sally Beauty Holdings | National Vision vs. MarineMax | National Vision vs. Sportsmans | National Vision vs. 1 800 FLOWERSCOM |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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