Correlation Between Global E and GMS

Can any of the company-specific risk be diversified away by investing in both Global E 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 Global E and GMS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global E Online and GMS Inc, you can compare the effects of market volatilities on Global E 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 Global E with a short position of GMS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global E and GMS.

Diversification Opportunities for Global E and GMS

0.15

Correlation Coefficient

Global E  GMS

Average diversification

The 3 months correlation between Global and GMS is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Global E Online and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc and Global E 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 Global E Online 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 Global E i.e., Global E and GMS go up and down completely randomly.

Pair Corralation between Global E and GMS

Given the investment horizon of 90 days Global E Online is expected to generate 0.98 times more return on investment than GMS. However, Global E Online is 1.02 times less risky than GMS. It trades about 0.18 of its potential returns per unit of risk. GMS Inc is currently generating about -0.52 per unit of risk. If you would invest  5,202  in Global E Online on September 25, 2024 and sell it today you would earn a total of  313.00  from holding Global E Online or generate 6.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Global E Online  vs.  GMS Inc

Global E Online

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global E Online are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Global E exhibited solid returns over the last few months and may actually be approaching a breakup point.

GMS Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Global E and GMS

The main advantage of trading using opposite Global E and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global E 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 Global E Online 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.