Correlation Between Caesarstone and GMS

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

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

Diversification Opportunities for Caesarstone and GMS

0.3

Correlation Coefficient

Caesarstone  GMS

Weak diversification

The 3 months correlation between Caesarstone and GMS is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Caesarstone and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc and Caesarstone 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 Caesarstone 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 Caesarstone i.e., Caesarstone and GMS go up and down completely randomly.

Pair Corralation between Caesarstone and GMS

Given the investment horizon of 90 days Caesarstone is expected to under-perform the GMS. In addition to that, Caesarstone is 1.83 times more volatile than GMS Inc. It trades about -0.03 of its total potential returns per unit of risk. GMS Inc is currently generating about 0.39 per unit of volatility. If you would invest  8,286  in GMS Inc on July 12, 2024 and sell it today you would earn a total of  1,001  from holding GMS Inc or generate 12.08% return on investment over 90 days.

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

Caesarstone  vs.  GMS Inc

Caesarstone

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caesarstone has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in November 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

GMS Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GMS Inc are ranked lower than 4 (%) 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 November 2024.

Pair Trading with Caesarstone and GMS

The main advantage of trading using opposite Caesarstone and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caesarstone 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 Caesarstone 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.