Correlation Between Sealed Air and GMS
Can any of the company-specific risk be diversified away by investing in both Sealed Air 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 Sealed Air and GMS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sealed Air and GMS Inc, you can compare the effects of market volatilities on Sealed Air 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 Sealed Air with a short position of GMS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sealed Air and GMS.
Diversification Opportunities for Sealed Air and GMS
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sealed and GMS is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Sealed Air and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc and Sealed Air 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 Sealed Air 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 Sealed Air i.e., Sealed Air and GMS go up and down completely randomly.
Pair Corralation between Sealed Air and GMS
Considering the 90-day investment horizon Sealed Air is expected to generate 7.21 times less return on investment than GMS. But when comparing it to its historical volatility, Sealed Air is 1.25 times less risky than GMS. It trades about 0.05 of its potential returns per unit of risk. GMS Inc is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 8,995 in GMS Inc on August 30, 2024 and sell it today you would earn a total of 1,027 from holding GMS Inc or generate 11.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sealed Air vs. GMS Inc
Performance |
| Timeline |
| Sealed Air |
| GMS Inc |
Sealed Air and GMS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sealed Air and GMS
The main advantage of trading using opposite Sealed Air and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sealed Air 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.| Sealed Air vs. Avery Dennison Corp | Sealed Air vs. International Paper | Sealed Air vs. Sonoco Products | Sealed Air vs. Packaging Corp of |
| 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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