Correlation Between Loandepot and GMS

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

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

Diversification Opportunities for Loandepot and GMS

-0.06

Correlation Coefficient

Loandepot  GMS

Good diversification

The 3 months correlation between Loandepot and GMS is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Loandepot and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc and Loandepot 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 Loandepot are associated (or correlated) with GMS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMS Inc has no effect on the direction of Loandepot i.e., Loandepot and GMS go up and down completely randomly.

Pair Corralation between Loandepot and GMS

Considering the 90-day investment horizon Loandepot is expected to under-perform the GMS. In addition to that, Loandepot is 2.41 times more volatile than GMS Inc. It trades about -0.14 of its total potential returns per unit of risk. GMS Inc is currently generating about 0.02 per unit of volatility. If you would invest  8,970  in GMS Inc on September 17, 2024 and sell it today you would earn a total of  130.00  from holding GMS Inc or generate 1.45% return on investment over 90 days.

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

Loandepot  vs.  GMS Inc

Loandepot

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Loandepot has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

GMS Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GMS Inc are ranked lower than 1 (%) 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.

Pair Trading with Loandepot and GMS

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

The idea behind Loandepot and GMS Inc 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.