Correlation Between GMS and A SPAC

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

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

Diversification Opportunities for GMS and A SPAC

0.75

Correlation Coefficient

GMS  A SPAC

Poor diversification

The 3 months correlation between GMS and ASPC is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and A SPAC III in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A SPAC III 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 A SPAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A SPAC III has no effect on the direction of GMS i.e., GMS and A SPAC go up and down completely randomly.

Pair Corralation between GMS and A SPAC

Considering the 90-day investment horizon GMS Inc is expected to generate 27.03 times more return on investment than A SPAC. However, GMS is 27.03 times more volatile than A SPAC III. It trades about 0.16 of its potential returns per unit of risk. A SPAC III is currently generating about 0.13 per unit of risk. If you would invest  7,720  in GMS Inc on May 12, 2025 and sell it today you would earn a total of  3,222  from holding GMS Inc or generate 41.74% return on investment over 90 days.

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

GMS Inc  vs.  A SPAC III

GMS Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GMS Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent primary indicators, GMS unveiled solid returns over the last few months and may actually be approaching a breakup point.

A SPAC III

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in A SPAC III are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, A SPAC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with GMS and A SPAC

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

The idea behind GMS Inc and A SPAC III 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.