Correlation Between GMS and Rivian Automotive

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

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

Diversification Opportunities for GMS and Rivian Automotive

-0.48

Correlation Coefficient

GMS  Rivian Automotive

Very good diversification

The 3 months correlation between GMS and Rivian is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Rivian Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rivian Automotive 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 Rivian Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rivian Automotive has no effect on the direction of GMS i.e., GMS and Rivian Automotive go up and down completely randomly.

Pair Corralation between GMS and Rivian Automotive

Considering the 90-day investment horizon GMS Inc is expected to generate 0.4 times more return on investment than Rivian Automotive. However, GMS Inc is 2.47 times less risky than Rivian Automotive. It trades about 0.08 of its potential returns per unit of risk. Rivian Automotive is currently generating about 0.0 per unit of risk. If you would invest  5,258  in GMS Inc on September 6, 2024 and sell it today you would earn a total of  4,518  from holding GMS Inc or generate 85.93% return on investment over 90 days.

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

GMS Inc  vs.  Rivian Automotive

GMS Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GMS Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, GMS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Rivian Automotive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rivian Automotive has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Rivian Automotive is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with GMS and Rivian Automotive

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

The idea behind GMS Inc and Rivian Automotive 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 Commodity Directory module to find actively traded commodities issued by global exchanges.