Correlation Between GMS and Interface
Can any of the company-specific risk be diversified away by investing in both GMS and Interface 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 Interface into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and Interface, you can compare the effects of market volatilities on GMS and Interface 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 Interface. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and Interface.
Diversification Opportunities for GMS and Interface
Very poor diversification
The 3 months correlation between GMS and Interface is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Interface in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interface 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 Interface. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interface has no effect on the direction of GMS i.e., GMS and Interface go up and down completely randomly.
Pair Corralation between GMS and Interface
Considering the 90-day investment horizon GMS is expected to generate 3.59 times less return on investment than Interface. But when comparing it to its historical volatility, GMS Inc is 3.0 times less risky than Interface. It trades about 0.14 of its potential returns per unit of risk. Interface is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,897 in Interface on August 30, 2024 and sell it today you would earn a total of 755.00 from holding Interface or generate 39.8% 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. Interface
Performance |
| Timeline |
| GMS Inc |
| Interface |
GMS and Interface Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMS and Interface
The main advantage of trading using opposite GMS and Interface positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, Interface 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 Interface will offset losses from the drop in Interface's long position.| GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
| Interface vs. Quanex Building Products | Interface vs. Janus International Group | Interface vs. Apogee Enterprises | Interface 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. |