Correlation Between GMS and Lifezone Metals

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

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

Diversification Opportunities for GMS and Lifezone Metals

0.61

Correlation Coefficient

GMS  Lifezone Metals

Poor diversification

The 3 months correlation between GMS and Lifezone is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Lifezone Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifezone Metals 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 Lifezone Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifezone Metals has no effect on the direction of GMS i.e., GMS and Lifezone Metals go up and down completely randomly.

Pair Corralation between GMS and Lifezone Metals

Considering the 90-day investment horizon GMS is expected to generate 1.04 times less return on investment than Lifezone Metals. But when comparing it to its historical volatility, GMS Inc is 1.56 times less risky than Lifezone Metals. It trades about 0.09 of its potential returns per unit of risk. Lifezone Metals Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  643.00  in Lifezone Metals Limited on September 13, 2024 and sell it today you would earn a total of  55.00  from holding Lifezone Metals Limited or generate 8.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

GMS Inc  vs.  Lifezone Metals Limited

GMS Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GMS Inc are ranked lower than 7 (%) 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.

Lifezone Metals

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lifezone Metals Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Lifezone Metals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GMS and Lifezone Metals

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

The idea behind GMS Inc and Lifezone Metals Limited 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.