Correlation Between GMS and Adient PLC

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

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

Diversification Opportunities for GMS and Adient PLC

-0.53

Correlation Coefficient

GMS  Adient PLC

Excellent diversification

The 3 months correlation between GMS and Adient is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Adient PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adient PLC and GMS 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 GMS Inc are associated (or correlated) with Adient PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adient PLC has no effect on the direction of GMS i.e., GMS and Adient PLC go up and down completely randomly.

Pair Corralation between GMS and Adient PLC

Considering the 90-day investment horizon GMS Inc is expected to generate 0.7 times more return on investment than Adient PLC. However, GMS Inc is 1.42 times less risky than Adient PLC. It trades about 0.13 of its potential returns per unit of risk. Adient PLC is currently generating about -0.01 per unit of risk. If you would invest  8,293  in GMS Inc on September 11, 2024 and sell it today you would earn a total of  1,207  from holding GMS Inc or generate 14.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

GMS Inc  vs.  Adient PLC

GMS Inc

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GMS Inc are ranked lower than 10 (%) 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

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with GMS and Adient PLC

The main advantage of trading using opposite GMS and Adient PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, Adient PLC 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 Adient PLC will offset losses from the drop in Adient PLC's long position.

The idea behind GMS Inc and Adient PLC 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.