Correlation Between GMS and United States
Can any of the company-specific risk be diversified away by investing in both GMS and United States 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 United States into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and United States Steel, you can compare the effects of market volatilities on GMS and United States 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 United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and United States.
Diversification Opportunities for GMS and United States
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GMS and United is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of GMS i.e., GMS and United States go up and down completely randomly.
Pair Corralation between GMS and United States
Considering the 90-day investment horizon GMS Inc is expected to generate 0.56 times more return on investment than United States. However, GMS Inc is 1.78 times less risky than United States. It trades about 0.25 of its potential returns per unit of risk. United States Steel is currently generating about 0.09 per unit of risk. If you would invest 9,094 in GMS Inc on September 2, 2024 and sell it today you would earn a total of 941.00 from holding GMS Inc or generate 10.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GMS Inc vs. United States Steel
Performance |
| Timeline |
| GMS Inc |
| United States Steel |
GMS and United States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMS and United States
The main advantage of trading using opposite GMS and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, United States 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 United States will offset losses from the drop in United States' long position.| GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
| United States vs. Fortitude Gold Corp | United States vs. New Gold | United States vs. Galiano Gold | United States vs. GoldMining |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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