Correlation Between GMS and NioCorp Developments
Can any of the company-specific risk be diversified away by investing in both GMS and NioCorp Developments 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 NioCorp Developments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and NioCorp Developments Ltd, you can compare the effects of market volatilities on GMS and NioCorp Developments 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 NioCorp Developments. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and NioCorp Developments.
Diversification Opportunities for GMS and NioCorp Developments
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between GMS and NioCorp is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and NioCorp Developments Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NioCorp Developments 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 NioCorp Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NioCorp Developments has no effect on the direction of GMS i.e., GMS and NioCorp Developments go up and down completely randomly.
Pair Corralation between GMS and NioCorp Developments
Considering the 90-day investment horizon GMS Inc is expected to generate 0.47 times more return on investment than NioCorp Developments. However, GMS Inc is 2.11 times less risky than NioCorp Developments. It trades about 0.27 of its potential returns per unit of risk. NioCorp Developments Ltd is currently generating about -0.34 per unit of risk. If you would invest 8,926 in GMS Inc on August 24, 2024 and sell it today you would earn a total of 983.00 from holding GMS Inc or generate 11.01% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
GMS Inc vs. NioCorp Developments Ltd
Performance |
Timeline |
GMS Inc |
NioCorp Developments |
GMS and NioCorp Developments Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GMS and NioCorp Developments
The main advantage of trading using opposite GMS and NioCorp Developments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, NioCorp Developments 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 NioCorp Developments will offset losses from the drop in NioCorp Developments' 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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