Correlation Between BBB Foods and GMS

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

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

Diversification Opportunities for BBB Foods and GMS

0.13

Correlation Coefficient

BBB Foods  GMS

Average diversification

The 3 months correlation between BBB and GMS is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding BBB Foods and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc and BBB Foods 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 BBB Foods 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 BBB Foods i.e., BBB Foods and GMS go up and down completely randomly.

Pair Corralation between BBB Foods and GMS

Given the investment horizon of 90 days BBB Foods is expected to under-perform the GMS. In addition to that, BBB Foods is 1.54 times more volatile than GMS Inc. It trades about -0.02 of its total potential returns per unit of risk. GMS Inc is currently generating about -0.03 per unit of volatility. If you would invest  9,007  in GMS Inc on September 24, 2024 and sell it today you would lose (406.00) from holding GMS Inc or give up 4.51% of portfolio value over 90 days.

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

BBB Foods  vs.  GMS Inc

BBB Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BBB Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, BBB Foods is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the 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 BBB Foods and GMS

The main advantage of trading using opposite BBB Foods and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBB Foods 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 BBB Foods 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.