Correlation Between Gildan Activewear and George Weston

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

By analyzing existing cross correlation between Gildan Activewear and George Weston Limited, you can compare the effects of market volatilities on Gildan Activewear and George Weston 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 George Weston. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gildan Activewear and George Weston.

Diversification Opportunities for Gildan Activewear and George Weston

0.2

Correlation Coefficient

Gildan Activewear  George Weston

Modest diversification

The 3 months correlation between Gildan and George is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Gildan Activewear and George Weston Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on George Weston Limited 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 George Weston. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of George Weston Limited has no effect on the direction of Gildan Activewear i.e., Gildan Activewear and George Weston go up and down completely randomly.

Pair Corralation between Gildan Activewear and George Weston

Assuming the 90 days trading horizon Gildan Activewear is expected to generate 0.81 times more return on investment than George Weston. However, Gildan Activewear is 1.23 times less risky than George Weston. It trades about 0.29 of its potential returns per unit of risk. George Weston Limited is currently generating about 0.03 per unit of risk. If you would invest  5,998  in Gildan Activewear on August 31, 2024 and sell it today you would earn a total of  982.00  from holding Gildan Activewear or generate 16.37% return on investment over 90 days.

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

Gildan Activewear  vs.  George Weston Limited

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.

George Weston Limited

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in George Weston Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, George Weston is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Gildan Activewear and George Weston

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

The idea behind Gildan Activewear and George Weston Limited 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.