Correlation Between GMS and Owens Corning
Can any of the company-specific risk be diversified away by investing in both GMS and Owens Corning 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 Owens Corning into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and Owens Corning, you can compare the effects of market volatilities on GMS and Owens Corning 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 Owens Corning. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and Owens Corning.
Diversification Opportunities for GMS and Owens Corning
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GMS and Owens is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Owens Corning in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Owens Corning 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 Owens Corning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Owens Corning has no effect on the direction of GMS i.e., GMS and Owens Corning go up and down completely randomly.
Pair Corralation between GMS and Owens Corning
Considering the 90-day investment horizon GMS Inc is expected to generate 1.25 times more return on investment than Owens Corning. However, GMS is 1.25 times more volatile than Owens Corning. It trades about 0.31 of its potential returns per unit of risk. Owens Corning is currently generating about 0.34 per unit of risk. If you would invest 8,989 in GMS Inc on August 26, 2024 and sell it today you would earn a total of 1,181 from holding GMS Inc or generate 13.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
GMS Inc vs. Owens Corning
Performance |
| Timeline |
| GMS Inc |
| Owens Corning |
GMS and Owens Corning Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMS and Owens Corning
The main advantage of trading using opposite GMS and Owens Corning positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, Owens Corning 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 Owens Corning will offset losses from the drop in Owens Corning's 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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