Correlation Between INVITATION HOMES and Gildan Activewear

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

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

Diversification Opportunities for INVITATION HOMES and Gildan Activewear

-0.23

Correlation Coefficient

INVITATION HOMES  Gildan Activewear

Very good diversification

The 3 months correlation between INVITATION and Gildan is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding INVITATION HOMES DL and Gildan Activewear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gildan Activewear and INVITATION HOMES 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 INVITATION HOMES DL 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 INVITATION HOMES i.e., INVITATION HOMES and Gildan Activewear go up and down completely randomly.

Pair Corralation between INVITATION HOMES and Gildan Activewear

Assuming the 90 days horizon INVITATION HOMES DL is expected to under-perform the Gildan Activewear. In addition to that, INVITATION HOMES is 1.54 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 0.26 per unit of volatility. If you would invest  4,002  in Gildan Activewear on September 5, 2024 and sell it today you would earn a total of  758.00  from holding Gildan Activewear or generate 18.94% return on investment over 90 days.

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

INVITATION HOMES DL  vs.  Gildan Activewear

INVITATION HOMES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INVITATION HOMES DL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, INVITATION HOMES is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 INVITATION HOMES and Gildan Activewear

The main advantage of trading using opposite INVITATION HOMES and Gildan Activewear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INVITATION HOMES 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 INVITATION HOMES DL 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..