Correlation Between GMS and Loandepot

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

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

Diversification Opportunities for GMS and Loandepot

-0.06

Correlation Coefficient

GMS  Loandepot

Good diversification

The 3 months correlation between GMS and Loandepot is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Loandepot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loandepot 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 Loandepot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loandepot has no effect on the direction of GMS i.e., GMS and Loandepot go up and down completely randomly.

Pair Corralation between GMS and Loandepot

Considering the 90-day investment horizon GMS Inc is expected to generate 0.87 times more return on investment than Loandepot. However, GMS Inc is 1.15 times less risky than Loandepot. It trades about -0.25 of its potential returns per unit of risk. Loandepot is currently generating about -0.36 per unit of risk. If you would invest  9,990  in GMS Inc on September 16, 2024 and sell it today you would lose (890.00) from holding GMS Inc or give up 8.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

GMS Inc  vs.  Loandepot

GMS Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GMS Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Loandepot

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Loandepot has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with GMS and Loandepot

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

The idea behind GMS Inc and Loandepot 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.