Correlation Between GMS and RadNet
Can any of the company-specific risk be diversified away by investing in both GMS and RadNet 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 RadNet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and RadNet Inc, you can compare the effects of market volatilities on GMS and RadNet 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 RadNet. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and RadNet.
Diversification Opportunities for GMS and RadNet
Very poor diversification
The 3 months correlation between GMS and RadNet is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and RadNet Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RadNet Inc 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 RadNet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RadNet Inc has no effect on the direction of GMS i.e., GMS and RadNet go up and down completely randomly.
Pair Corralation between GMS and RadNet
Considering the 90-day investment horizon GMS is expected to generate 3.43 times less return on investment than RadNet. But when comparing it to its historical volatility, GMS Inc is 1.39 times less risky than RadNet. It trades about 0.04 of its potential returns per unit of risk. RadNet Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 5,887 in RadNet Inc on August 30, 2024 and sell it today you would earn a total of 2,362 from holding RadNet Inc or generate 40.12% 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. RadNet Inc
Performance |
| Timeline |
| GMS Inc |
| RadNet Inc |
GMS and RadNet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMS and RadNet
The main advantage of trading using opposite GMS and RadNet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, RadNet 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 RadNet will offset losses from the drop in RadNet's long position.| GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
Other Complementary Tools
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. |