Correlation Between Pason Systems and Gildan Activewear

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

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

Diversification Opportunities for Pason Systems and Gildan Activewear

-0.37

Correlation Coefficient

Pason Systems  Gildan Activewear

Very good diversification

The 3 months correlation between Pason and Gildan is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Pason Systems and Gildan Activewear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gildan Activewear and Pason Systems 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 Pason Systems 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 Pason Systems i.e., Pason Systems and Gildan Activewear go up and down completely randomly.

Pair Corralation between Pason Systems and Gildan Activewear

Assuming the 90 days trading horizon Pason Systems is expected to under-perform the Gildan Activewear. In addition to that, Pason Systems is 1.31 times more volatile than Gildan Activewear. It trades about -0.13 of its total potential returns per unit of risk. Gildan Activewear is currently generating about 0.15 per unit of volatility. If you would invest  7,042  in Gildan Activewear on December 2, 2024 and sell it today you would earn a total of  773.00  from holding Gildan Activewear or generate 10.98% return on investment over 90 days.

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

Pason Systems  vs.  Gildan Activewear

Pason Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pason Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Gildan Activewear

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gildan Activewear are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Gildan Activewear may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Pason Systems and Gildan Activewear

The main advantage of trading using opposite Pason Systems and Gildan Activewear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pason Systems 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 Pason Systems 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.