Correlation Between Uber Technologies and GMS

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

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

Diversification Opportunities for Uber Technologies and GMS

0.63

Correlation Coefficient

Uber Technologies  GMS

Poor diversification

The 3 months correlation between Uber and GMS is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Uber Technologies and GMS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMS Inc and Uber Technologies 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 Uber Technologies 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 Uber Technologies i.e., Uber Technologies and GMS go up and down completely randomly.

Pair Corralation between Uber Technologies and GMS

Given the investment horizon of 90 days Uber Technologies is expected to under-perform the GMS. In addition to that, Uber Technologies is 1.43 times more volatile than GMS Inc. It trades about -0.35 of its total potential returns per unit of risk. GMS Inc is currently generating about -0.16 per unit of volatility. If you would invest  9,592  in GMS Inc on January 25, 2024 and sell it today you would lose (440.00) from holding GMS Inc or give up 4.59% of portfolio value over 90 days.

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

Uber Technologies  vs.  GMS Inc

Uber Technologies

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Uber Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, Uber Technologies may actually be approaching a critical reversion point that can send shares even higher in May 2024.

GMS Inc

Risk-Adjusted Performance

12 of 100

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 weak primary indicators, GMS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Uber Technologies and GMS

The main advantage of trading using opposite Uber Technologies and GMS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Uber Technologies 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 Uber Technologies 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.