Correlation Between Tapestry and Gildan Activewear

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

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

Diversification Opportunities for Tapestry and Gildan Activewear

0.03

Correlation Coefficient

Tapestry  Gildan Activewear

Significant diversification

The 3 months correlation between Tapestry and Gildan is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Tapestry and Gildan Activewear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gildan Activewear and Tapestry 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 Tapestry 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 Tapestry i.e., Tapestry and Gildan Activewear go up and down completely randomly.

Pair Corralation between Tapestry and Gildan Activewear

Considering the 90-day investment horizon Tapestry is expected to generate 1.21 times more return on investment than Gildan Activewear. However, Tapestry is 1.21 times more volatile than Gildan Activewear. It trades about 0.06 of its potential returns per unit of risk. Gildan Activewear is currently generating about 0.07 per unit of risk. 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

Tapestry  vs.  Gildan Activewear

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.

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.

Pair Trading with Tapestry and Gildan Activewear

The main advantage of trading using opposite Tapestry and Gildan Activewear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tapestry 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 Tapestry 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.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.