Correlation Between GMS and Flexible Solutions
Can any of the company-specific risk be diversified away by investing in both GMS and Flexible Solutions 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 Flexible Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and Flexible Solutions International, you can compare the effects of market volatilities on GMS and Flexible Solutions 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 Flexible Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and Flexible Solutions.
Diversification Opportunities for GMS and Flexible Solutions
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GMS and Flexible is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Flexible Solutions Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexible Solutions 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 Flexible Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexible Solutions has no effect on the direction of GMS i.e., GMS and Flexible Solutions go up and down completely randomly.
Pair Corralation between GMS and Flexible Solutions
Considering the 90-day investment horizon GMS Inc is expected to generate 0.42 times more return on investment than Flexible Solutions. However, GMS Inc is 2.39 times less risky than Flexible Solutions. It trades about 0.26 of its potential returns per unit of risk. Flexible Solutions International is currently generating about 0.0 per unit of risk. If you would invest 8,995 in GMS Inc on August 30, 2024 and sell it today you would earn a total of 1,027 from holding GMS Inc or generate 11.42% 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. Flexible Solutions Internation
Performance |
| Timeline |
| GMS Inc |
| Flexible Solutions |
GMS and Flexible Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMS and Flexible Solutions
The main advantage of trading using opposite GMS and Flexible Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, Flexible Solutions 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 Flexible Solutions will offset losses from the drop in Flexible Solutions' long position.| GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
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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 CEOs Directory module to screen CEOs from public companies around the world.
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