Correlation Between GMS and Masonite International

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

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

Diversification Opportunities for GMS and Masonite International

0.76

Correlation Coefficient

GMS  Masonite International

Poor diversification

The 3 months correlation between GMS and Masonite is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding GMS Inc and Masonite International Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masonite International 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 Masonite International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masonite International has no effect on the direction of GMS i.e., GMS and Masonite International go up and down completely randomly.

Pair Corralation between GMS and Masonite International

Considering the 90-day investment horizon GMS is expected to generate 1.36 times less return on investment than Masonite International. But when comparing it to its historical volatility, GMS Inc is 1.98 times less risky than Masonite International. It trades about 0.08 of its potential returns per unit of risk. Masonite International Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  10,329  in Masonite International Corp on January 24, 2024 and sell it today you would earn a total of  2,797  from holding Masonite International Corp or generate 27.08% 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.  Masonite International Corp

GMS Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GMS Inc are ranked lower than 11 (%) 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.

Masonite International

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Masonite International Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Masonite International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GMS and Masonite International

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

The idea behind GMS Inc and Masonite International 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.