Correlation Between Sphere Entertainment and GMS

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

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

Diversification Opportunities for Sphere Entertainment and GMS

-0.23

Correlation Coefficient

Sphere Entertainment  GMS

Very good diversification

The 3 months correlation between Sphere and GMS is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Sphere Entertainment Co and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc and Sphere Entertainment 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 Sphere Entertainment Co 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 Sphere Entertainment i.e., Sphere Entertainment and GMS go up and down completely randomly.

Pair Corralation between Sphere Entertainment and GMS

Given the investment horizon of 90 days Sphere Entertainment Co is expected to generate 1.21 times more return on investment than GMS. However, Sphere Entertainment is 1.21 times more volatile than GMS Inc. It trades about -0.14 of its potential returns per unit of risk. GMS Inc is currently generating about -0.29 per unit of risk. If you would invest  4,065  in Sphere Entertainment Co on September 19, 2024 and sell it today you would lose (264.00) from holding Sphere Entertainment Co or give up 6.49% of portfolio value over 90 days.

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

Sphere Entertainment Co  vs.  GMS Inc

Sphere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting performance, the Stock's technical indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

GMS Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GMS Inc has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Sphere Entertainment and GMS

The main advantage of trading using opposite Sphere Entertainment and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sphere Entertainment 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 Sphere Entertainment Co 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 Stocks Directory module to find actively traded stocks across global markets.