Correlation Between GMS and Minerals Technologies

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

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

Diversification Opportunities for GMS and Minerals Technologies

0.91

Correlation Coefficient

GMS  Minerals Technologies

Almost no diversification

The 3 months correlation between GMS and Minerals is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Minerals Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Minerals Technologies 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 Minerals Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Minerals Technologies has no effect on the direction of GMS i.e., GMS and Minerals Technologies go up and down completely randomly.

Pair Corralation between GMS and Minerals Technologies

Considering the 90-day investment horizon GMS is expected to generate 3.28 times less return on investment than Minerals Technologies. But when comparing it to its historical volatility, GMS Inc is 1.03 times less risky than Minerals Technologies. It trades about 0.03 of its potential returns per unit of risk. Minerals Technologies is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  7,243  in Minerals Technologies on September 16, 2024 and sell it today you would earn a total of  668.00  from holding Minerals Technologies or generate 9.22% return on investment over 90 days.

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

GMS Inc  vs.  Minerals Technologies

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.

Minerals Technologies

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Minerals Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Minerals Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GMS and Minerals Technologies

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

The idea behind GMS Inc and Minerals Technologies 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.