Correlation Between GMS and China Aircraft

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

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

Diversification Opportunities for GMS and China Aircraft

-0.66

Correlation Coefficient

GMS  China Aircraft

Excellent diversification

The 3 months correlation between GMS and China is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and China Aircraft Leasing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Aircraft Leasing 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 China Aircraft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Aircraft Leasing has no effect on the direction of GMS i.e., GMS and China Aircraft go up and down completely randomly.

Pair Corralation between GMS and China Aircraft

Considering the 90-day investment horizon GMS Inc is expected to generate 1.8 times more return on investment than China Aircraft. However, GMS is 1.8 times more volatile than China Aircraft Leasing. It trades about -0.02 of its potential returns per unit of risk. China Aircraft Leasing is currently generating about -0.15 per unit of risk. If you would invest  9,432  in GMS Inc on September 13, 2024 and sell it today you would lose (200.00) from holding GMS Inc or give up 2.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.67%
Values	Daily Returns

GMS Inc  vs.  China Aircraft Leasing

GMS Inc

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GMS Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, GMS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

China Aircraft Leasing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Aircraft Leasing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with GMS and China Aircraft

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

The idea behind GMS Inc and China Aircraft Leasing 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.