Correlation Between Gildan Activewear and Micron Technology

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

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

Diversification Opportunities for Gildan Activewear and Micron Technology

0.11

Correlation Coefficient

Gildan Activewear  Micron Technology

Average diversification

The 3 months correlation between Gildan and Micron is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Gildan Activewear and Micron Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micron Technology 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 Micron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micron Technology has no effect on the direction of Gildan Activewear i.e., Gildan Activewear and Micron Technology go up and down completely randomly.

Pair Corralation between Gildan Activewear and Micron Technology

Considering the 90-day investment horizon Gildan Activewear is expected to under-perform the Micron Technology. But the stock apears to be less risky and, when comparing its historical volatility, Gildan Activewear is 2.86 times less risky than Micron Technology. The stock trades about -0.04 of its potential returns per unit of risk. The Micron Technology is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  10,846  in Micron Technology on December 17, 2024 and sell it today you would lose (535.00) from holding Micron Technology or give up 4.93% of portfolio value over 90 days.

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

Gildan Activewear  vs.  Micron Technology

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.

Micron Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Micron Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Micron Technology 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 Micron Technology

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

The idea behind Gildan Activewear and Micron Technology 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 Anywhere module to track or share privately all of your investments from the convenience of any device.