Correlation Between GMS and Loar Holdings
Can any of the company-specific risk be diversified away by investing in both GMS and Loar Holdings 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 Loar Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and Loar Holdings, you can compare the effects of market volatilities on GMS and Loar Holdings 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 Loar Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and Loar Holdings.
Diversification Opportunities for GMS and Loar Holdings
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GMS and Loar is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Loar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loar 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 Loar Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loar Holdings has no effect on the direction of GMS i.e., GMS and Loar Holdings go up and down completely randomly.
Pair Corralation between GMS and Loar Holdings
Considering the 90-day investment horizon GMS Inc is expected to under-perform the Loar Holdings. But the stock apears to be less risky and, when comparing its historical volatility, GMS Inc is 1.6 times less risky than Loar Holdings. The stock trades about -0.1 of its potential returns per unit of risk. The Loar Holdings is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 7,443 in Loar Holdings on November 30, 2024 and sell it today you would lose (176.00) from holding Loar Holdings or give up 2.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GMS Inc vs. Loar Holdings
Performance |
| Timeline |
| GMS Inc |
| Loar Holdings |
GMS and Loar Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMS and Loar Holdings
The main advantage of trading using opposite GMS and Loar Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, Loar Holdings 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 Loar Holdings will offset losses from the drop in Loar Holdings' 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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