Correlation Between Gildan Activewear and Tapestry

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

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

Diversification Opportunities for Gildan Activewear and Tapestry

0.03

Correlation Coefficient

Gildan Activewear  Tapestry

Significant diversification

The 3 months correlation between Gildan and Tapestry is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Gildan Activewear and Tapestry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tapestry 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 Tapestry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tapestry has no effect on the direction of Gildan Activewear i.e., Gildan Activewear and Tapestry go up and down completely randomly.

Pair Corralation between Gildan Activewear and Tapestry

Considering the 90-day investment horizon Gildan Activewear is expected to generate 1.02 times less return on investment than Tapestry. But when comparing it to its historical volatility, Gildan Activewear is 1.21 times less risky than Tapestry. It trades about 0.07 of its potential returns per unit of risk. Tapestry is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,345  in Tapestry on October 24, 2024 and sell it today you would earn a total of  2,990  from holding Tapestry or generate 68.81% 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.  Tapestry

Gildan Activewear

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gildan Activewear are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

Tapestry

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tapestry are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Tapestry reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gildan Activewear and Tapestry

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

The idea behind Gildan Activewear and Tapestry 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.