Correlation Between GMS and KeyCorp

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

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

Diversification Opportunities for GMS and KeyCorp

0.27

Correlation Coefficient

GMS  KeyCorp

Modest diversification

The 3 months correlation between GMS and KeyCorp is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp 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 KeyCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KeyCorp has no effect on the direction of GMS i.e., GMS and KeyCorp go up and down completely randomly.

Pair Corralation between GMS and KeyCorp

Considering the 90-day investment horizon GMS Inc is expected to under-perform the KeyCorp. But the stock apears to be less risky and, when comparing its historical volatility, GMS Inc is 1.01 times less risky than KeyCorp. The stock trades about -0.13 of its potential returns per unit of risk. The KeyCorp is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2,352  in KeyCorp on February 2, 2024 and sell it today you would lose (32.00) from holding KeyCorp or give up 1.36% of portfolio value over 90 days.

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

GMS Inc  vs.  KeyCorp

GMS Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GMS Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, GMS may actually be approaching a critical reversion point that can send shares even higher in June 2024.

KeyCorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KeyCorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, KeyCorp is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with GMS and KeyCorp

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

The idea behind GMS Inc and KeyCorp 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.