Correlation Between GMS and Wabash National

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Can any of the company-specific risk be diversified away by investing in both GMS and Wabash National 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 Wabash National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMS Inc and Wabash National, you can compare the effects of market volatilities on GMS and Wabash National 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 Wabash National. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and Wabash National.

Diversification Opportunities for GMS and Wabash National

0.48
  Correlation Coefficient

Very weak diversification

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

Pair Corralation between GMS and Wabash National

Considering the 90-day investment horizon GMS Inc is expected to generate 0.79 times more return on investment than Wabash National. However, GMS Inc is 1.26 times less risky than Wabash National. It trades about 0.21 of its potential returns per unit of risk. Wabash National is currently generating about 0.07 per unit of risk. If you would invest  8,297  in GMS Inc on September 6, 2024 and sell it today you would earn a total of  1,932  from holding GMS Inc or generate 23.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

GMS Inc  vs.  Wabash National

 Performance 
       Timeline  
GMS Inc 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
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.
Wabash National 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Wabash National are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Wabash National may actually be approaching a critical reversion point that can send shares even higher in January 2025.

GMS and Wabash National Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GMS and Wabash National

The main advantage of trading using opposite GMS and Wabash National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, Wabash National 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 Wabash National will offset losses from the drop in Wabash National's long position.
The idea behind GMS Inc and Wabash National 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.
Check out your portfolio center.
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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