Correlation Between Brunswick and Gildan Activewear

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

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

Diversification Opportunities for Brunswick and Gildan Activewear

0.53

Correlation Coefficient

Brunswick  Gildan Activewear

Very weak diversification

The 3 months correlation between Brunswick and Gildan is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Brunswick and Gildan Activewear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gildan Activewear and Brunswick 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 Brunswick 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 Brunswick i.e., Brunswick and Gildan Activewear go up and down completely randomly.

Pair Corralation between Brunswick and Gildan Activewear

Allowing for the 90-day total investment horizon Brunswick is expected to under-perform the Gildan Activewear. In addition to that, Brunswick is 1.28 times more volatile than Gildan Activewear. It trades about -0.46 of its total potential returns per unit of risk. Gildan Activewear is currently generating about -0.03 per unit of volatility. If you would invest  4,864  in Gildan Activewear on October 15, 2024 and sell it today you would lose (34.00) from holding Gildan Activewear or give up 0.7% of portfolio value over 90 days.

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

Brunswick  vs.  Gildan Activewear

Brunswick

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brunswick has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Gildan Activewear

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gildan Activewear are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, Gildan Activewear is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Brunswick and Gildan Activewear

The main advantage of trading using opposite Brunswick and Gildan Activewear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brunswick 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 Brunswick 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.