Correlation Between GMS and Baldwin Insurance

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

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

Diversification Opportunities for GMS and Baldwin Insurance

0.22

Correlation Coefficient

GMS  Baldwin Insurance

Modest diversification

The 3 months correlation between GMS and Baldwin is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and The Baldwin Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baldwin Insurance 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 Baldwin Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baldwin Insurance has no effect on the direction of GMS i.e., GMS and Baldwin Insurance go up and down completely randomly.

Pair Corralation between GMS and Baldwin Insurance

Considering the 90-day investment horizon GMS Inc is expected to generate 0.56 times more return on investment than Baldwin Insurance. However, GMS Inc is 1.78 times less risky than Baldwin Insurance. It trades about -0.04 of its potential returns per unit of risk. The Baldwin Insurance is currently generating about -0.1 per unit of risk. If you would invest  8,930  in GMS Inc on October 1, 2024 and sell it today you would lose (446.00) from holding GMS Inc or give up 4.99% of portfolio value over 90 days.

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

GMS Inc  vs.  The Baldwin Insurance

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.

Baldwin Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Baldwin Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with GMS and Baldwin Insurance

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

The idea behind GMS Inc and The Baldwin Insurance 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.