Correlation Between Global Ship and GMS
Can any of the company-specific risk be diversified away by investing in both Global Ship and GMS 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 Global Ship and GMS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Ship Lease and GMS Inc, you can compare the effects of market volatilities on Global Ship and GMS 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 Global Ship with a short position of GMS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Ship and GMS.
Diversification Opportunities for Global Ship and GMS
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Global and GMS is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Global Ship Lease and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc and Global Ship 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 Global Ship Lease are associated (or correlated) with GMS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMS Inc has no effect on the direction of Global Ship i.e., Global Ship and GMS go up and down completely randomly.
Pair Corralation between Global Ship and GMS
Assuming the 90 days trading horizon Global Ship is expected to generate 12.39 times less return on investment than GMS. But when comparing it to its historical volatility, Global Ship Lease is 2.94 times less risky than GMS. It trades about 0.06 of its potential returns per unit of risk. GMS Inc is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 9,161 in GMS Inc on September 3, 2024 and sell it today you would earn a total of 874.00 from holding GMS Inc or generate 9.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Ship Lease vs. GMS Inc
Performance |
| Timeline |
| Global Ship Lease |
| GMS Inc |
Global Ship and GMS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Ship and GMS
The main advantage of trading using opposite Global Ship and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Ship position performs unexpectedly, GMS 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 GMS will offset losses from the drop in GMS's long position.The idea behind Global Ship Lease and GMS Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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