Correlation Between H M and Gildan Activewear

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

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

Diversification Opportunities for H M and Gildan Activewear

0.57

Correlation Coefficient

H M  Gildan Activewear

Very weak diversification

The 3 months correlation between HMSB and Gildan is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding H M Hennes and Gildan Activewear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gildan Activewear and H M 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 H M Hennes are associated (or correlated) with Gildan Activewear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gildan Activewear has no effect on the direction of H M i.e., H M and Gildan Activewear go up and down completely randomly.

Pair Corralation between H M and Gildan Activewear

Assuming the 90 days trading horizon H M is expected to generate 3.22 times less return on investment than Gildan Activewear. In addition to that, H M is 2.95 times more volatile than Gildan Activewear. It trades about 0.02 of its total potential returns per unit of risk. Gildan Activewear is currently generating about 0.23 per unit of volatility. If you would invest  3,466  in Gildan Activewear on September 5, 2024 and sell it today you would earn a total of  1,294  from holding Gildan Activewear or generate 37.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.66%
Values	Daily Returns

H M Hennes  vs.  Gildan Activewear

H M Hennes

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in H M Hennes are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, H M exhibited solid returns over the last few months and may actually be approaching a breakup point.

Gildan Activewear

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gildan Activewear are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gildan Activewear reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with H M and Gildan Activewear

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

The idea behind H M Hennes and Gildan Activewear 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.