Correlation Between GMS and Kaiser Aluminum
Can any of the company-specific risk be diversified away by investing in both GMS and Kaiser Aluminum 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 Kaiser Aluminum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and Kaiser Aluminum, you can compare the effects of market volatilities on GMS and Kaiser Aluminum 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 Kaiser Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and Kaiser Aluminum.
Diversification Opportunities for GMS and Kaiser Aluminum
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between GMS and Kaiser is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Kaiser Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaiser Aluminum 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 Kaiser Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaiser Aluminum has no effect on the direction of GMS i.e., GMS and Kaiser Aluminum go up and down completely randomly.
Pair Corralation between GMS and Kaiser Aluminum
Considering the 90-day investment horizon GMS Inc is expected to under-perform the Kaiser Aluminum. But the stock apears to be less risky and, when comparing its historical volatility, GMS Inc is 1.18 times less risky than Kaiser Aluminum. The stock trades about -0.04 of its potential returns per unit of risk. The Kaiser Aluminum is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 7,481 in Kaiser Aluminum on November 1, 2024 and sell it today you would lose (408.00) from holding Kaiser Aluminum or give up 5.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
GMS Inc vs. Kaiser Aluminum
Performance |
| Timeline |
| GMS Inc |
| Kaiser Aluminum |
GMS and Kaiser Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMS and Kaiser Aluminum
The main advantage of trading using opposite GMS and Kaiser Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, Kaiser Aluminum 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 Kaiser Aluminum will offset losses from the drop in Kaiser Aluminum's long position.| GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
| Kaiser Aluminum vs. Century Aluminum | Kaiser Aluminum vs. China Hongqiao Group | Kaiser Aluminum vs. Constellium Nv | Kaiser Aluminum vs. Alcoa Corp |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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