Correlation Between Gildan Activewear and Ross Stores

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

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

Diversification Opportunities for Gildan Activewear and Ross Stores

0.1

Correlation Coefficient

Gildan Activewear  Ross Stores

Average diversification

The 3 months correlation between Gildan and Ross is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Gildan Activewear and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores 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 Ross Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ross Stores has no effect on the direction of Gildan Activewear i.e., Gildan Activewear and Ross Stores go up and down completely randomly.

Pair Corralation between Gildan Activewear and Ross Stores

Considering the 90-day investment horizon Gildan Activewear is expected to generate 1.33 times more return on investment than Ross Stores. However, Gildan Activewear is 1.33 times more volatile than Ross Stores. It trades about 0.1 of its potential returns per unit of risk. Ross Stores is currently generating about 0.08 per unit of risk. If you would invest  2,881  in Gildan Activewear on October 5, 2024 and sell it today you would earn a total of  1,810  from holding Gildan Activewear or generate 62.83% return on investment over 90 days.

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

Gildan Activewear  vs.  Ross Stores

Gildan Activewear

Risk-Adjusted Performance

0 of 100

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.

Ross Stores

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ross Stores are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Ross Stores may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Gildan Activewear and Ross Stores

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

The idea behind Gildan Activewear and Ross Stores 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.