Correlation Between GMS and GoHealth
Can any of the company-specific risk be diversified away by investing in both GMS and GoHealth 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 GoHealth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and GoHealth, you can compare the effects of market volatilities on GMS and GoHealth 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 GoHealth. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and GoHealth.
Diversification Opportunities for GMS and GoHealth
Poor diversification
The 3 months correlation between GMS and GoHealth is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and GoHealth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoHealth 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 GoHealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoHealth has no effect on the direction of GMS i.e., GMS and GoHealth go up and down completely randomly.
Pair Corralation between GMS and GoHealth
Considering the 90-day investment horizon GMS Inc is expected to generate 0.4 times more return on investment than GoHealth. However, GMS Inc is 2.47 times less risky than GoHealth. It trades about 0.1 of its potential returns per unit of risk. GoHealth is currently generating about 0.02 per unit of risk. If you would invest 6,764 in GMS Inc on August 26, 2024 and sell it today you would earn a total of 3,406 from holding GMS Inc or generate 50.35% 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. GoHealth
Performance |
| Timeline |
| GMS Inc |
| GoHealth |
GMS and GoHealth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMS and GoHealth
The main advantage of trading using opposite GMS and GoHealth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, GoHealth 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 GoHealth will offset losses from the drop in GoHealth's long position.| GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
| GoHealth vs. eHealth | GoHealth vs. Tian Ruixiang Holdings | GoHealth vs. Huize Holding | GoHealth vs. Selectquote |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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