Correlation Between GMS and Gap,

Can any of the company-specific risk be diversified away by investing in both GMS and Gap, 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 Gap, 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 Gap,, you can compare the effects of market volatilities on GMS and Gap, 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 Gap,. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and Gap,.

Diversification Opportunities for GMS and Gap,

0.3

Correlation Coefficient

GMS  Gap,

Weak diversification

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

Pair Corralation between GMS and Gap,

Considering the 90-day investment horizon GMS Inc is expected to under-perform the Gap,. But the stock apears to be less risky and, when comparing its historical volatility, GMS Inc is 1.55 times less risky than Gap,. The stock trades about -0.01 of its potential returns per unit of risk. The The Gap, is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,090  in The Gap, on September 26, 2024 and sell it today you would earn a total of  313.00  from holding The Gap, or generate 14.98% return on investment over 90 days.

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

GMS Inc  vs.  The Gap,

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.

Gap,

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Gap, reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GMS and Gap,

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

The idea behind GMS Inc and The Gap, 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 CEOs Directory module to screen CEOs from public companies around the world.