Correlation Between Adient PLC and GMS

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Can any of the company-specific risk be diversified away by investing in both Adient PLC 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 Adient PLC and GMS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adient PLC and GMS Inc, you can compare the effects of market volatilities on Adient PLC 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 Adient PLC with a short position of GMS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adient PLC and GMS.

Diversification Opportunities for Adient PLC and GMS

-0.44
  Correlation Coefficient

Very good diversification

The 3 months correlation between Adient and GMS is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Adient PLC and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc and Adient PLC 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 Adient PLC 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 Adient PLC i.e., Adient PLC and GMS go up and down completely randomly.

Pair Corralation between Adient PLC and GMS

Given the investment horizon of 90 days Adient PLC is expected to under-perform the GMS. In addition to that, Adient PLC is 1.22 times more volatile than GMS Inc. It trades about -0.04 of its total potential returns per unit of risk. GMS Inc is currently generating about 0.08 per unit of volatility. If you would invest  5,258  in GMS Inc on September 6, 2024 and sell it today you would earn a total of  4,971  from holding GMS Inc or generate 94.54% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Adient PLC  vs.  GMS Inc

 Performance 
       Timeline  
Adient PLC 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Adient PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Adient PLC is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
GMS Inc 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in GMS Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, GMS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Adient PLC and GMS Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Adient PLC and GMS

The main advantage of trading using opposite Adient PLC and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adient PLC 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 Adient PLC 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.
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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 Stocks Directory module to find actively traded stocks across global markets.

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