Correlation Between GMS and Maiden Holdings
Can any of the company-specific risk be diversified away by investing in both GMS and Maiden 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 Maiden 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 Maiden Holdings, you can compare the effects of market volatilities on GMS and Maiden 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 Maiden Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and Maiden Holdings.
Diversification Opportunities for GMS and Maiden Holdings
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GMS and Maiden is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Maiden Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maiden 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 Maiden Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maiden Holdings has no effect on the direction of GMS i.e., GMS and Maiden Holdings go up and down completely randomly.
Pair Corralation between GMS and Maiden Holdings
Considering the 90-day investment horizon GMS Inc is expected to generate 0.73 times more return on investment than Maiden Holdings. However, GMS Inc is 1.37 times less risky than Maiden Holdings. It trades about 0.08 of its potential returns per unit of risk. Maiden Holdings is currently generating about 0.03 per unit of risk. If you would invest 5,375 in GMS Inc on August 30, 2024 and sell it today you would earn a total of 4,647 from holding GMS Inc or generate 86.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.78% |
| Values | Daily Returns |
GMS Inc vs. Maiden Holdings
Performance |
| Timeline |
| GMS Inc |
| Maiden Holdings |
GMS and Maiden Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMS and Maiden Holdings
The main advantage of trading using opposite GMS and Maiden Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, Maiden 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 Maiden Holdings will offset losses from the drop in Maiden 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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