Correlation Between Gildan Activewear and Moncler SpA

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

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

Diversification Opportunities for Gildan Activewear and Moncler SpA

0.47

Correlation Coefficient

Gildan Activewear  Moncler SpA

Very weak diversification

The 3 months correlation between Gildan and Moncler is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Gildan Activewear and Moncler SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moncler SpA 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 Moncler SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moncler SpA has no effect on the direction of Gildan Activewear i.e., Gildan Activewear and Moncler SpA go up and down completely randomly.

Pair Corralation between Gildan Activewear and Moncler SpA

Assuming the 90 days horizon Gildan Activewear is expected to under-perform the Moncler SpA. But the stock apears to be less risky and, when comparing its historical volatility, Gildan Activewear is 1.33 times less risky than Moncler SpA. The stock trades about -0.08 of its potential returns per unit of risk. The Moncler SpA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  5,072  in Moncler SpA on December 27, 2024 and sell it today you would earn a total of  754.00  from holding Moncler SpA or generate 14.87% return on investment over 90 days.

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

Gildan Activewear  vs.  Moncler SpA

Gildan Activewear

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gildan Activewear has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Moncler SpA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Moncler SpA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Moncler SpA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gildan Activewear and Moncler SpA

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

The idea behind Gildan Activewear and Moncler SpA 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.