Correlation Between GMS and Latham
Can any of the company-specific risk be diversified away by investing in both GMS and Latham 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 Latham into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and Latham Group, you can compare the effects of market volatilities on GMS and Latham 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 Latham. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and Latham.
Diversification Opportunities for GMS and Latham
Very good diversification
The 3 months correlation between GMS and Latham is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Latham Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Latham Group 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 Latham. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Latham Group has no effect on the direction of GMS i.e., GMS and Latham go up and down completely randomly.
Pair Corralation between GMS and Latham
Considering the 90-day investment horizon GMS Inc is expected to under-perform the Latham. But the stock apears to be less risky and, when comparing its historical volatility, GMS Inc is 2.41 times less risky than Latham. The stock trades about -0.08 of its potential returns per unit of risk. The Latham Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 662.00 in Latham Group on October 26, 2024 and sell it today you would earn a total of 43.00 from holding Latham Group or generate 6.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GMS Inc vs. Latham Group
Performance |
| Timeline |
| GMS Inc |
| Latham Group |
GMS and Latham Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMS and Latham
The main advantage of trading using opposite GMS and Latham positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, Latham 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 Latham will offset losses from the drop in Latham's long position.| GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
| Latham vs. Janus International Group | Latham vs. Quanex Building Products | Latham vs. GMS Inc | Latham vs. Gibraltar Industries |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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