Correlation Between GMS and Binah Capital

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

By analyzing existing cross correlation between GMS Inc and Binah Capital Group,, you can compare the effects of market volatilities on GMS and Binah Capital 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 Binah Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and Binah Capital.

Diversification Opportunities for GMS and Binah Capital

-0.3

Correlation Coefficient

GMS  Binah Capital

Very good diversification

The 3 months correlation between GMS and Binah is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Binah Capital Group, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Binah Capital Group, 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 Binah Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Binah Capital Group, has no effect on the direction of GMS i.e., GMS and Binah Capital go up and down completely randomly.

Pair Corralation between GMS and Binah Capital

Considering the 90-day investment horizon GMS is expected to generate 17.42 times less return on investment than Binah Capital. But when comparing it to its historical volatility, GMS Inc is 11.92 times less risky than Binah Capital. It trades about 0.05 of its potential returns per unit of risk. Binah Capital Group, is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Binah Capital Group, on September 27, 2024 and sell it today you would lose (6.32) from holding Binah Capital Group, or give up 52.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	65.6%
Values	Daily Returns

GMS Inc  vs.  Binah Capital Group,

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.

Binah Capital Group,

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Binah Capital Group, has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, Binah Capital showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GMS and Binah Capital

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

The idea behind GMS Inc and Binah Capital Group, 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.