Correlation Between Gildan Activewear and CCL Industries

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

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

Diversification Opportunities for Gildan Activewear and CCL Industries

0.21

Correlation Coefficient

Gildan Activewear  CCL Industries

Modest diversification

The 3 months correlation between Gildan and CCL is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Gildan Activewear and CCL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CCL Industries and Gildan Activewear 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 Gildan Activewear are associated (or correlated) with CCL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CCL Industries has no effect on the direction of Gildan Activewear i.e., Gildan Activewear and CCL Industries go up and down completely randomly.

Pair Corralation between Gildan Activewear and CCL Industries

Assuming the 90 days trading horizon Gildan Activewear is expected to generate 1.06 times more return on investment than CCL Industries. However, Gildan Activewear is 1.06 times more volatile than CCL Industries. It trades about -0.02 of its potential returns per unit of risk. CCL Industries is currently generating about -0.06 per unit of risk. If you would invest  6,605  in Gildan Activewear on December 30, 2024 and sell it today you would lose (168.00) from holding Gildan Activewear or give up 2.54% of portfolio value over 90 days.

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

Gildan Activewear  vs.  CCL Industries

Gildan Activewear

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gildan Activewear has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Gildan Activewear is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

CCL Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days CCL Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CCL Industries is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Gildan Activewear and CCL Industries

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

The idea behind Gildan Activewear and CCL Industries 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.