Correlation Between Gildan Activewear and S A P

Can any of the company-specific risk be diversified away by investing in both Gildan Activewear and S A P 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 Gildan Activewear and S A P into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gildan Activewear and Saputo Inc, you can compare the effects of market volatilities on Gildan Activewear and S A P 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 Gildan Activewear with a short position of S A P. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gildan Activewear and S A P.

Diversification Opportunities for Gildan Activewear and S A P

-0.96

Correlation Coefficient

Gildan Activewear  S A P

Pay attention - limited upside

The 3 months correlation between Gildan and SAP is -0.96. Overlapping area represents the amount of risk that can be diversified away by holding Gildan Activewear and Saputo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saputo Inc and Gildan Activewear 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 Gildan Activewear are associated (or correlated) with S A P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saputo Inc has no effect on the direction of Gildan Activewear i.e., Gildan Activewear and S A P go up and down completely randomly.

Pair Corralation between Gildan Activewear and S A P

Assuming the 90 days trading horizon Gildan Activewear is expected to generate 0.83 times more return on investment than S A P. However, Gildan Activewear is 1.2 times less risky than S A P. It trades about 0.22 of its potential returns per unit of risk. Saputo Inc is currently generating about -0.18 per unit of risk. If you would invest  6,699  in Gildan Activewear on August 31, 2024 and sell it today you would earn a total of  281.00  from holding Gildan Activewear or generate 4.19% return on investment over 90 days.

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

Gildan Activewear  vs.  Saputo Inc

Gildan Activewear

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gildan Activewear are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Gildan Activewear displayed solid returns over the last few months and may actually be approaching a breakup point.

Saputo Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Saputo Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Gildan Activewear and S A P

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

The idea behind Gildan Activewear and Saputo 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.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.