Correlation Between Gildan Activewear and Willow Biosciences

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

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

Diversification Opportunities for Gildan Activewear and Willow Biosciences

-0.54

Correlation Coefficient

Gildan Activewear  Willow Biosciences

Excellent diversification

The 3 months correlation between Gildan and Willow is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Gildan Activewear and Willow Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willow Biosciences 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 Willow Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willow Biosciences has no effect on the direction of Gildan Activewear i.e., Gildan Activewear and Willow Biosciences go up and down completely randomly.

Pair Corralation between Gildan Activewear and Willow Biosciences

Assuming the 90 days trading horizon Gildan Activewear is expected to generate 0.11 times more return on investment than Willow Biosciences. However, Gildan Activewear is 8.79 times less risky than Willow Biosciences. It trades about -0.03 of its potential returns per unit of risk. Willow Biosciences is currently generating about 0.0 per unit of risk. If you would invest  6,680  in Gildan Activewear on December 22, 2024 and sell it today you would lose (207.00) from holding Gildan Activewear or give up 3.1% of portfolio value over 90 days.

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

Gildan Activewear  vs.  Willow Biosciences

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.

Willow Biosciences

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Gildan Activewear and Willow Biosciences

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

The idea behind Gildan Activewear and Willow Biosciences 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.