Correlation Between GMS and Western Copper
Can any of the company-specific risk be diversified away by investing in both GMS and Western Copper 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 Western Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and Western Copper and, you can compare the effects of market volatilities on GMS and Western Copper 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 Western Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and Western Copper.
Diversification Opportunities for GMS and Western Copper
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between GMS and Western is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Western Copper and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Copper 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 Western Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Copper has no effect on the direction of GMS i.e., GMS and Western Copper go up and down completely randomly.
Pair Corralation between GMS and Western Copper
Considering the 90-day investment horizon GMS Inc is expected to generate 0.58 times more return on investment than Western Copper. However, GMS Inc is 1.74 times less risky than Western Copper. It trades about 0.08 of its potential returns per unit of risk. Western Copper and is currently generating about -0.01 per unit of risk. If you would invest 6,453 in GMS Inc on August 27, 2024 and sell it today you would earn a total of 3,717 from holding GMS Inc or generate 57.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GMS Inc vs. Western Copper and
Performance |
| Timeline |
| GMS Inc |
| Western Copper |
GMS and Western Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMS and Western Copper
The main advantage of trading using opposite GMS and Western Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, Western Copper 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 Western Copper will offset losses from the drop in Western Copper's long position.| GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
| Western Copper vs. Fury Gold Mines | Western Copper vs. EMX Royalty Corp | Western Copper vs. Nevada King Gold | Western Copper vs. Aftermath Silver |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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