Correlation Between GMS and Weyco
Can any of the company-specific risk be diversified away by investing in both GMS and Weyco 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 Weyco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and Weyco Group, you can compare the effects of market volatilities on GMS and Weyco 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 Weyco. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and Weyco.
Diversification Opportunities for GMS and Weyco
Very poor diversification
The 3 months correlation between GMS and Weyco is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Weyco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weyco 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 Weyco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weyco Group has no effect on the direction of GMS i.e., GMS and Weyco go up and down completely randomly.
Pair Corralation between GMS and Weyco
Considering the 90-day investment horizon GMS Inc is expected to generate 0.89 times more return on investment than Weyco. However, GMS Inc is 1.13 times less risky than Weyco. It trades about 0.09 of its potential returns per unit of risk. Weyco Group is currently generating about 0.05 per unit of risk. If you would invest 4,833 in GMS Inc on August 24, 2024 and sell it today you would earn a total of 5,337 from holding GMS Inc or generate 110.43% 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. Weyco Group
Performance |
| Timeline |
| GMS Inc |
| Weyco Group |
GMS and Weyco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMS and Weyco
The main advantage of trading using opposite GMS and Weyco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, Weyco 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 Weyco will offset losses from the drop in Weyco'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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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