Correlation Between Capri Holdings and Gildan Activewear

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

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

Diversification Opportunities for Capri Holdings and Gildan Activewear

-0.79

Correlation Coefficient

Capri Holdings  Gildan Activewear

Pay attention - limited upside

The 3 months correlation between Capri and Gildan is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Capri Holdings Limited and Gildan Activewear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gildan Activewear and Capri Holdings 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 Capri Holdings Limited 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 Capri Holdings i.e., Capri Holdings and Gildan Activewear go up and down completely randomly.

Pair Corralation between Capri Holdings and Gildan Activewear

Assuming the 90 days horizon Capri Holdings Limited is expected to under-perform the Gildan Activewear. In addition to that, Capri Holdings is 2.14 times more volatile than Gildan Activewear. It trades about -0.22 of its total potential returns per unit of risk. Gildan Activewear is currently generating about -0.26 per unit of volatility. If you would invest  4,700  in Gildan Activewear on October 1, 2024 and sell it today you would lose (220.00) from holding Gildan Activewear or give up 4.68% of portfolio value over 90 days.

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

Capri Holdings Limited  vs.  Gildan Activewear

Capri Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capri Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Gildan Activewear

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gildan Activewear are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gildan Activewear may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Capri Holdings and Gildan Activewear

The main advantage of trading using opposite Capri Holdings and Gildan Activewear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capri Holdings 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 Capri Holdings Limited 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.