Correlation Between Gildan Activewear and Universal

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

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

Diversification Opportunities for Gildan Activewear and Universal

0.46

Correlation Coefficient

Gildan Activewear  Universal

Very weak diversification

The 3 months correlation between Gildan and Universal is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Gildan Activewear and Universal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal 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 Universal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal has no effect on the direction of Gildan Activewear i.e., Gildan Activewear and Universal go up and down completely randomly.

Pair Corralation between Gildan Activewear and Universal

Considering the 90-day investment horizon Gildan Activewear is expected to generate 0.85 times more return on investment than Universal. However, Gildan Activewear is 1.18 times less risky than Universal. It trades about -0.08 of its potential returns per unit of risk. Universal is currently generating about -0.33 per unit of risk. If you would invest  4,784  in Gildan Activewear on October 9, 2024 and sell it today you would lose (74.00) from holding Gildan Activewear or give up 1.55% of portfolio value over 90 days.

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

Gildan Activewear  vs.  Universal

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.

Universal

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Universal are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Universal is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Gildan Activewear and Universal

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

The idea behind Gildan Activewear and Universal 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.