Correlation Between Premium Brands and Gildan Activewear

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

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

Diversification Opportunities for Premium Brands and Gildan Activewear

-0.84

Correlation Coefficient

Premium Brands  Gildan Activewear

Pay attention - limited upside

The 3 months correlation between Premium and Gildan is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Premium Brands Holdings and Gildan Activewear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gildan Activewear and Premium Brands 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 Premium Brands Holdings 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 Premium Brands i.e., Premium Brands and Gildan Activewear go up and down completely randomly.

Pair Corralation between Premium Brands and Gildan Activewear

Assuming the 90 days trading horizon Premium Brands Holdings is expected to generate 1.09 times more return on investment than Gildan Activewear. However, Premium Brands is 1.09 times more volatile than Gildan Activewear. It trades about 0.01 of its potential returns per unit of risk. Gildan Activewear is currently generating about -0.02 per unit of risk. If you would invest  7,998  in Premium Brands Holdings on October 9, 2024 and sell it today you would earn a total of  9.00  from holding Premium Brands Holdings or generate 0.11% return on investment over 90 days.

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

Premium Brands Holdings  vs.  Gildan Activewear

Premium Brands Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premium Brands Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Gildan Activewear

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gildan Activewear are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Gildan Activewear is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Premium Brands and Gildan Activewear

The main advantage of trading using opposite Premium Brands and Gildan Activewear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premium Brands 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 Premium Brands Holdings 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.