Correlation Between Palomar Holdings and GMS

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

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

Diversification Opportunities for Palomar Holdings and GMS

-0.78

Correlation Coefficient

Palomar Holdings  GMS

Pay attention - limited upside

The 3 months correlation between Palomar and GMS is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Palomar Holdings and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc and Palomar Holdings 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 Palomar Holdings 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 Palomar Holdings i.e., Palomar Holdings and GMS go up and down completely randomly.

Pair Corralation between Palomar Holdings and GMS

Given the investment horizon of 90 days Palomar Holdings is expected to under-perform the GMS. But the stock apears to be less risky and, when comparing its historical volatility, Palomar Holdings is 1.92 times less risky than GMS. The stock trades about -0.13 of its potential returns per unit of risk. The GMS Inc is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  7,412  in GMS Inc on May 5, 2025 and sell it today you would earn a total of  3,549  from holding GMS Inc or generate 47.88% return on investment over 90 days.

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

Palomar Holdings  vs.  GMS Inc

Palomar Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Palomar Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's primary indicators remain relatively invariable which may send shares a bit higher in September 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

GMS Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GMS Inc are ranked lower than 14 (%) 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.

Pair Trading with Palomar Holdings and GMS

The main advantage of trading using opposite Palomar Holdings and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palomar Holdings 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 Palomar Holdings 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.