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 |
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 1.44 times less risky than Adient PLC. It trades about 0.15 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 1,455 from holding GMS Inc or generate 17.54% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
GMS Inc vs. Adient PLC
Performance |
Timeline |
GMS Inc |
Adient PLC |
GMS and Adient PLC Volatility Contrast
Predicted Return Density |
Returns |
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.GMS vs. Quanex Building Products | GMS vs. Apogee Enterprises | GMS vs. Azek Company | GMS vs. Beacon Roofing Supply |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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