Correlation Between Wabash National and GMS

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

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

Diversification Opportunities for Wabash National and GMS

0.52

Correlation Coefficient

Wabash National  GMS

Very weak diversification

The 3 months correlation between Wabash and GMS is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Wabash National and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc and Wabash National 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 Wabash National 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 Wabash National i.e., Wabash National and GMS go up and down completely randomly.

Pair Corralation between Wabash National and GMS

Considering the 90-day investment horizon Wabash National is expected to generate 2.77 times less return on investment than GMS. In addition to that, Wabash National is 1.22 times more volatile than GMS Inc. It trades about 0.04 of its total potential returns per unit of risk. GMS Inc is currently generating about 0.15 per unit of volatility. If you would invest  8,286  in GMS Inc on September 10, 2024 and sell it today you would earn a total of  1,419  from holding GMS Inc or generate 17.13% return on investment over 90 days.

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

Wabash National  vs.  GMS Inc

Wabash National

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wabash National are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Wabash National is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with Wabash National and GMS

The main advantage of trading using opposite Wabash National and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wabash National 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 Wabash National 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.