Correlation Between Gildan Activewear and Foot Locker

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Can any of the company-specific risk be diversified away by investing in both Gildan Activewear and Foot Locker 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 Foot Locker into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gildan Activewear and Foot Locker, you can compare the effects of market volatilities on Gildan Activewear and Foot Locker 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 Foot Locker. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gildan Activewear and Foot Locker.

Diversification Opportunities for Gildan Activewear and Foot Locker

0.31
  Correlation Coefficient

Weak diversification

The 3 months correlation between Gildan and Foot is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Gildan Activewear and Foot Locker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foot Locker 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 Foot Locker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foot Locker has no effect on the direction of Gildan Activewear i.e., Gildan Activewear and Foot Locker go up and down completely randomly.

Pair Corralation between Gildan Activewear and Foot Locker

Considering the 90-day investment horizon Gildan Activewear is expected to generate 0.39 times more return on investment than Foot Locker. However, Gildan Activewear is 2.58 times less risky than Foot Locker. It trades about 0.13 of its potential returns per unit of risk. Foot Locker is currently generating about -0.01 per unit of risk. If you would invest  3,071  in Gildan Activewear on October 9, 2024 and sell it today you would earn a total of  1,579  from holding Gildan Activewear or generate 51.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Gildan Activewear  vs.  Foot Locker

 Performance 
       Timeline  
Gildan Activewear 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Foot Locker 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Foot Locker has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Gildan Activewear and Foot Locker Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Gildan Activewear and Foot Locker

The main advantage of trading using opposite Gildan Activewear and Foot Locker positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gildan Activewear position performs unexpectedly, Foot Locker 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 Foot Locker will offset losses from the drop in Foot Locker's long position.
The idea behind Gildan Activewear and Foot Locker 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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