Correlation Between GMS and Sphere 3D

Can any of the company-specific risk be diversified away by investing in both GMS and Sphere 3D 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 Sphere 3D into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GMS Inc and Sphere 3D Corp, you can compare the effects of market volatilities on GMS and Sphere 3D 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 Sphere 3D. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMS and Sphere 3D.

Diversification Opportunities for GMS and Sphere 3D

-0.65

Correlation Coefficient

GMS  Sphere 3D

Excellent diversification

The 3 months correlation between GMS and Sphere is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Sphere 3D Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sphere 3D Corp 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 Sphere 3D. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sphere 3D Corp has no effect on the direction of GMS i.e., GMS and Sphere 3D go up and down completely randomly.

Pair Corralation between GMS and Sphere 3D

Considering the 90-day investment horizon GMS is expected to generate 1.61 times less return on investment than Sphere 3D. But when comparing it to its historical volatility, GMS Inc is 7.28 times less risky than Sphere 3D. It trades about 0.26 of its potential returns per unit of risk. Sphere 3D Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  110.00  in Sphere 3D Corp on January 24, 2024 and sell it today you would earn a total of  10.00  from holding Sphere 3D Corp or generate 9.09% return on investment over 90 days.

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

GMS Inc  vs.  Sphere 3D Corp

GMS Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GMS Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, GMS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Sphere 3D Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sphere 3D Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with GMS and Sphere 3D

The main advantage of trading using opposite GMS and Sphere 3D positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMS position performs unexpectedly, Sphere 3D 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 Sphere 3D will offset losses from the drop in Sphere 3D's long position.

The idea behind GMS Inc and Sphere 3D Corp 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.