Correlation Between RadNet and GMS
Can any of the company-specific risk be diversified away by investing in both RadNet 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 RadNet and GMS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RadNet Inc and GMS Inc, you can compare the effects of market volatilities on RadNet 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 RadNet with a short position of GMS. Check out your portfolio center. Please also check ongoing floating volatility patterns of RadNet and GMS.
Diversification Opportunities for RadNet and GMS
Very poor diversification
The 3 months correlation between RadNet and GMS is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding RadNet Inc and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc and RadNet 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 RadNet Inc 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 RadNet i.e., RadNet and GMS go up and down completely randomly.
Pair Corralation between RadNet and GMS
Given the investment horizon of 90 days RadNet Inc is expected to generate 2.29 times more return on investment than GMS. However, RadNet is 2.29 times more volatile than GMS Inc. It trades about 0.22 of its potential returns per unit of risk. GMS Inc is currently generating about 0.26 per unit of risk. If you would invest 6,770 in RadNet Inc on August 30, 2024 and sell it today you would earn a total of 1,479 from holding RadNet Inc or generate 21.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
RadNet Inc vs. GMS Inc
Performance |
| Timeline |
| RadNet Inc |
| GMS Inc |
RadNet and GMS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RadNet and GMS
The main advantage of trading using opposite RadNet and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RadNet 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 RadNet Inc 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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