Correlation Between Gildan Activewear and Metro

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

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

Diversification Opportunities for Gildan Activewear and Metro

0.55

Correlation Coefficient

Gildan Activewear  Metro

Very weak diversification

The 3 months correlation between Gildan and Metro is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Gildan Activewear and Metro Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Inc 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 Metro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Inc has no effect on the direction of Gildan Activewear i.e., Gildan Activewear and Metro go up and down completely randomly.

Pair Corralation between Gildan Activewear and Metro

Assuming the 90 days trading horizon Gildan Activewear is expected to generate 1.11 times more return on investment than Metro. However, Gildan Activewear is 1.11 times more volatile than Metro Inc. It trades about 0.18 of its potential returns per unit of risk. Metro Inc is currently generating about 0.14 per unit of risk. If you would invest  6,445  in Gildan Activewear on October 22, 2024 and sell it today you would earn a total of  755.00  from holding Gildan Activewear or generate 11.71% return on investment over 90 days.

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

Gildan Activewear  vs.  Metro Inc

Gildan Activewear

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gildan Activewear are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Gildan Activewear may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Metro Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Metro Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Metro may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Gildan Activewear and Metro

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

The idea behind Gildan Activewear and Metro Inc 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.