Correlation Between Gildan Activewear and Steven Madden

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

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

Diversification Opportunities for Gildan Activewear and Steven Madden

-0.56

Correlation Coefficient

Gildan Activewear  Steven Madden

Excellent diversification

The 3 months correlation between Gildan and Steven is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Gildan Activewear and Steven Madden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steven Madden 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 Steven Madden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steven Madden has no effect on the direction of Gildan Activewear i.e., Gildan Activewear and Steven Madden go up and down completely randomly.

Pair Corralation between Gildan Activewear and Steven Madden

Considering the 90-day investment horizon Gildan Activewear is expected to generate 0.58 times more return on investment than Steven Madden. However, Gildan Activewear is 1.73 times less risky than Steven Madden. It trades about 0.01 of its potential returns per unit of risk. Steven Madden is currently generating about -0.1 per unit of risk. If you would invest  4,681  in Gildan Activewear on September 25, 2024 and sell it today you would earn a total of  2.00  from holding Gildan Activewear or generate 0.04% return on investment over 90 days.

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

Gildan Activewear  vs.  Steven Madden

Gildan Activewear

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gildan Activewear has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward indicators, Gildan Activewear is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Steven Madden

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steven Madden has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Gildan Activewear and Steven Madden

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

The idea behind Gildan Activewear and Steven Madden 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.