Correlation Between GMS and Anthem

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

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

Diversification Opportunities for GMS and Anthem

0.2

Correlation Coefficient

GMS  Anthem

Modest diversification

The 3 months correlation between GMS and Anthem is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Anthem Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anthem Inc 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 Anthem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anthem Inc has no effect on the direction of GMS i.e., GMS and Anthem go up and down completely randomly.

Pair Corralation between GMS and Anthem

If you would invest  48,258  in Anthem Inc on January 31, 2024 and sell it today you would earn a total of  0.00  from holding Anthem Inc or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	4.55%
Values	Daily Returns

GMS Inc  vs.  Anthem Inc

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 may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Anthem Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anthem Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Anthem is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with GMS and Anthem

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

The idea behind GMS Inc and Anthem 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..