Correlation Between Mills Music and Gildan Activewear

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

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

Diversification Opportunities for Mills Music and Gildan Activewear

0.64

Correlation Coefficient

Mills Music  Gildan Activewear

Poor diversification

The 3 months correlation between Mills and Gildan is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Mills Music Trust and Gildan Activewear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gildan Activewear and Mills Music 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 Mills Music Trust are associated (or correlated) with Gildan Activewear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gildan Activewear has no effect on the direction of Mills Music i.e., Mills Music and Gildan Activewear go up and down completely randomly.

Pair Corralation between Mills Music and Gildan Activewear

Assuming the 90 days horizon Mills Music is expected to generate 2.22 times less return on investment than Gildan Activewear. In addition to that, Mills Music is 2.2 times more volatile than Gildan Activewear. It trades about 0.03 of its total potential returns per unit of risk. Gildan Activewear is currently generating about 0.13 per unit of volatility. If you would invest  3,071  in Gildan Activewear on October 9, 2024 and sell it today you would earn a total of  1,579  from holding Gildan Activewear or generate 51.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	64.37%
Values	Daily Returns

Mills Music Trust  vs.  Gildan Activewear

Mills Music Trust

Risk-Adjusted Performance

3 of 100

Insignificant

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

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.

Pair Trading with Mills Music and Gildan Activewear

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

The idea behind Mills Music Trust and Gildan Activewear 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 CEOs Directory module to screen CEOs from public companies around the world.