Correlation Between GMS and Visteon Corp

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

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

Diversification Opportunities for GMS and Visteon Corp

-0.16

Correlation Coefficient

GMS  Visteon Corp

Good diversification

The 3 months correlation between GMS and Visteon is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Visteon Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visteon Corp 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 Visteon Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visteon Corp has no effect on the direction of GMS i.e., GMS and Visteon Corp go up and down completely randomly.

Pair Corralation between GMS and Visteon Corp

Considering the 90-day investment horizon GMS Inc is expected to generate 0.84 times more return on investment than Visteon Corp. However, GMS Inc is 1.2 times less risky than Visteon Corp. It trades about 0.14 of its potential returns per unit of risk. Visteon Corp is currently generating about 0.0 per unit of risk. If you would invest  8,245  in GMS Inc on September 7, 2024 and sell it today you would earn a total of  1,374  from holding GMS Inc or generate 16.66% return on investment over 90 days.

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

GMS Inc  vs.  Visteon Corp

GMS Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GMS Inc are ranked lower than 11 (%) 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.

Visteon Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Visteon Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Visteon Corp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with GMS and Visteon Corp

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

The idea behind GMS Inc and Visteon Corp 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.