Correlation Between GMS and Cementos Pacasmayo

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

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

Diversification Opportunities for GMS and Cementos Pacasmayo

0.51

Correlation Coefficient

GMS  Cementos Pacasmayo

Very weak diversification

The 3 months correlation between GMS and Cementos is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Cementos Pacasmayo SAA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cementos Pacasmayo SAA 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 Cementos Pacasmayo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cementos Pacasmayo SAA has no effect on the direction of GMS i.e., GMS and Cementos Pacasmayo go up and down completely randomly.

Pair Corralation between GMS and Cementos Pacasmayo

Considering the 90-day investment horizon GMS Inc is expected to generate 1.03 times more return on investment than Cementos Pacasmayo. However, GMS is 1.03 times more volatile than Cementos Pacasmayo SAA. It trades about 0.12 of its potential returns per unit of risk. Cementos Pacasmayo SAA is currently generating about 0.03 per unit of risk. If you would invest  5,810  in GMS Inc on January 26, 2024 and sell it today you would earn a total of  3,322  from holding GMS Inc or generate 57.18% return on investment over 90 days.

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

GMS Inc  vs.  Cementos Pacasmayo SAA

GMS Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GMS Inc are ranked lower than 9 (%) 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.

Cementos Pacasmayo SAA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cementos Pacasmayo SAA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Cementos Pacasmayo is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with GMS and Cementos Pacasmayo

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

The idea behind GMS Inc and Cementos Pacasmayo SAA 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.