Correlation Between Sea and GMS
Can any of the company-specific risk be diversified away by investing in both Sea 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 Sea and GMS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sea and GMS Inc, you can compare the effects of market volatilities on Sea 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 Sea with a short position of GMS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sea and GMS.
Diversification Opportunities for Sea and GMS
Poor diversification
The 3 months correlation between Sea and GMS is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Sea and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc and Sea 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 Sea 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 Sea i.e., Sea and GMS go up and down completely randomly.
Pair Corralation between Sea and GMS
Allowing for the 90-day total investment horizon Sea is expected to generate 1.49 times more return on investment than GMS. However, Sea is 1.49 times more volatile than GMS Inc. It trades about 0.19 of its potential returns per unit of risk. GMS Inc is currently generating about 0.2 per unit of risk. If you would invest 9,431 in Sea on August 28, 2024 and sell it today you would earn a total of 1,969 from holding Sea or generate 20.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sea vs. GMS Inc
Performance |
| Timeline |
| Sea |
| GMS Inc |
Sea and GMS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sea and GMS
The main advantage of trading using opposite Sea and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sea 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.| Sea vs. Atari SA | Sea vs. Victory Square Technologies | Sea vs. Motorsport Gaming Us | Sea vs. Alpha Esports Tech |
| 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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