Correlation Between Stepstone and GMS
Can any of the company-specific risk be diversified away by investing in both Stepstone 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 Stepstone and GMS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepstone Group and GMS Inc, you can compare the effects of market volatilities on Stepstone 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 Stepstone with a short position of GMS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepstone and GMS.
Diversification Opportunities for Stepstone and GMS
Very poor diversification
The 3 months correlation between Stepstone and GMS is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Stepstone Group and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc and Stepstone 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 Stepstone Group 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 Stepstone i.e., Stepstone and GMS go up and down completely randomly.
Pair Corralation between Stepstone and GMS
Given the investment horizon of 90 days Stepstone is expected to generate 1.32 times less return on investment than GMS. In addition to that, Stepstone is 1.65 times more volatile than GMS Inc. It trades about 0.14 of its total potential returns per unit of risk. GMS Inc is currently generating about 0.31 per unit of volatility. If you would invest 9,203 in GMS Inc on August 27, 2024 and sell it today you would earn a total of 1,181 from holding GMS Inc or generate 12.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepstone Group vs. GMS Inc
Performance |
| Timeline |
| Stepstone Group |
| GMS Inc |
Stepstone and GMS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepstone and GMS
The main advantage of trading using opposite Stepstone and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepstone 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.| Stepstone vs. Munivest Fund | Stepstone vs. Blackrock Muniyield Quality | Stepstone vs. Federated Investors B | Stepstone vs. Federated Premier Municipal |
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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