Correlation Between GMS and Olympic Steel
Can any of the company-specific risk be diversified away by investing in both GMS and Olympic Steel 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 Olympic Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and Olympic Steel, you can compare the effects of market volatilities on GMS and Olympic Steel 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 Olympic Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and Olympic Steel.
Diversification Opportunities for GMS and Olympic Steel
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between GMS and Olympic is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Olympic Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olympic 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 Olympic Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olympic Steel has no effect on the direction of GMS i.e., GMS and Olympic Steel go up and down completely randomly.
Pair Corralation between GMS and Olympic Steel
Considering the 90-day investment horizon GMS is expected to generate 2.55 times less return on investment than Olympic Steel. But when comparing it to its historical volatility, GMS Inc is 1.39 times less risky than Olympic Steel. It trades about 0.13 of its potential returns per unit of risk. Olympic Steel is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 3,182 in Olympic Steel on November 8, 2024 and sell it today you would earn a total of 322.00 from holding Olympic Steel or generate 10.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
GMS Inc vs. Olympic Steel
Performance |
| Timeline |
| GMS Inc |
| Olympic Steel |
GMS and Olympic Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMS and Olympic Steel
The main advantage of trading using opposite GMS and Olympic Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, Olympic Steel 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 Olympic Steel will offset losses from the drop in Olympic Steel's long position.| GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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