Correlation Between GMS and Fortune Brands
Can any of the company-specific risk be diversified away by investing in both GMS and Fortune Brands 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 Fortune Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and Fortune Brands Innovations, you can compare the effects of market volatilities on GMS and Fortune Brands 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 Fortune Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and Fortune Brands.
Diversification Opportunities for GMS and Fortune Brands
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between GMS and Fortune is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Fortune Brands Innovations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Brands Innov 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 Fortune Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortune Brands Innov has no effect on the direction of GMS i.e., GMS and Fortune Brands go up and down completely randomly.
Pair Corralation between GMS and Fortune Brands
Considering the 90-day investment horizon GMS Inc is expected to generate 0.99 times more return on investment than Fortune Brands. However, GMS Inc is 1.01 times less risky than Fortune Brands. It trades about 0.31 of its potential returns per unit of risk. Fortune Brands Innovations is currently generating about -0.25 per unit of risk. If you would invest 8,989 in GMS Inc on August 26, 2024 and sell it today you would earn a total of 1,181 from holding GMS Inc or generate 13.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GMS Inc vs. Fortune Brands Innovations
Performance |
| Timeline |
| GMS Inc |
| Fortune Brands Innov |
GMS and Fortune Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMS and Fortune Brands
The main advantage of trading using opposite GMS and Fortune Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, Fortune Brands 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 Fortune Brands will offset losses from the drop in Fortune Brands' long position.| GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
| Fortune Brands vs. Trex Company | Fortune Brands vs. Armstrong World Industries | Fortune Brands vs. Gibraltar Industries | Fortune Brands vs. Travis Perkins PLC |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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