Correlation Between Gildan Activewear and Columbia Sportswear

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

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

Diversification Opportunities for Gildan Activewear and Columbia Sportswear

0.66

Correlation Coefficient

Gildan Activewear  Columbia Sportswear

Poor diversification

The 3 months correlation between Gildan and Columbia is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Gildan Activewear and Columbia Sportswear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Sportswear 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 Columbia Sportswear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Sportswear has no effect on the direction of Gildan Activewear i.e., Gildan Activewear and Columbia Sportswear go up and down completely randomly.

Pair Corralation between Gildan Activewear and Columbia Sportswear

Considering the 90-day investment horizon Gildan Activewear is expected to generate 0.81 times more return on investment than Columbia Sportswear. However, Gildan Activewear is 1.24 times less risky than Columbia Sportswear. It trades about -0.03 of its potential returns per unit of risk. Columbia Sportswear is currently generating about -0.06 per unit of risk. If you would invest  4,628  in Gildan Activewear on December 29, 2024 and sell it today you would lose (147.00) from holding Gildan Activewear or give up 3.18% of portfolio value over 90 days.

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

Gildan Activewear  vs.  Columbia Sportswear

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. 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.

Columbia Sportswear

Risk-Adjusted Performance

Very Weak

Over the last 90 days Columbia Sportswear has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Gildan Activewear and Columbia Sportswear

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

The idea behind Gildan Activewear and Columbia Sportswear 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.