Correlation Between S A P and Gildan Activewear

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

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

Diversification Opportunities for S A P and Gildan Activewear

-0.96

Correlation Coefficient

S A P  Gildan Activewear

Pay attention - limited upside

The 3 months correlation between SAP and Gildan is -0.96. Overlapping area represents the amount of risk that can be diversified away by holding Saputo Inc and Gildan Activewear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gildan Activewear and S A P 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 Saputo Inc 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 S A P i.e., S A P and Gildan Activewear go up and down completely randomly.

Pair Corralation between S A P and Gildan Activewear

Assuming the 90 days trading horizon Saputo Inc is expected to under-perform the Gildan Activewear. In addition to that, S A P is 1.12 times more volatile than Gildan Activewear. It trades about -0.21 of its total potential returns per unit of risk. Gildan Activewear is currently generating about 0.29 per unit of volatility. 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 Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Saputo Inc  vs.  Gildan Activewear

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.

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.

Pair Trading with S A P and Gildan Activewear

The main advantage of trading using opposite S A P and Gildan Activewear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P 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 Saputo Inc 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.