Correlation Between Gildan Activewear and Kaiser Aluminum

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

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

Diversification Opportunities for Gildan Activewear and Kaiser Aluminum

0.75

Correlation Coefficient

Gildan Activewear  Kaiser Aluminum

Poor diversification

The 3 months correlation between Gildan and Kaiser is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Gildan Activewear and Kaiser Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaiser Aluminum 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 Kaiser Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaiser Aluminum has no effect on the direction of Gildan Activewear i.e., Gildan Activewear and Kaiser Aluminum go up and down completely randomly.

Pair Corralation between Gildan Activewear and Kaiser Aluminum

Considering the 90-day investment horizon Gildan Activewear is expected to generate 0.58 times more return on investment than Kaiser Aluminum. However, Gildan Activewear is 1.74 times less risky than Kaiser Aluminum. It trades about 0.13 of its potential returns per unit of risk. Kaiser Aluminum is currently generating about 0.03 per unit of risk. If you would invest  3,271  in Gildan Activewear on October 22, 2024 and sell it today you would earn a total of  1,704  from holding Gildan Activewear or generate 52.09% return on investment over 90 days.

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

Gildan Activewear  vs.  Kaiser Aluminum

Gildan Activewear

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gildan Activewear are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady forward indicators, Gildan Activewear may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Kaiser Aluminum

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kaiser Aluminum are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Kaiser Aluminum is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Gildan Activewear and Kaiser Aluminum

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

The idea behind Gildan Activewear and Kaiser Aluminum 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.