Correlation Between Gildan Activewear and Ralph Lauren

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

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

Diversification Opportunities for Gildan Activewear and Ralph Lauren

0.89

Correlation Coefficient

Gildan Activewear  Ralph Lauren

Very poor diversification

The 3 months correlation between Gildan and Ralph is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Gildan Activewear and Ralph Lauren in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ralph Lauren 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 Ralph Lauren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ralph Lauren has no effect on the direction of Gildan Activewear i.e., Gildan Activewear and Ralph Lauren go up and down completely randomly.

Pair Corralation between Gildan Activewear and Ralph Lauren

Assuming the 90 days horizon Gildan Activewear is expected to generate 0.54 times more return on investment than Ralph Lauren. However, Gildan Activewear is 1.86 times less risky than Ralph Lauren. It trades about 0.18 of its potential returns per unit of risk. Ralph Lauren is currently generating about 0.1 per unit of risk. If you would invest  3,486  in Gildan Activewear on September 24, 2024 and sell it today you would earn a total of  1,014  from holding Gildan Activewear or generate 29.09% return on investment over 90 days.

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

Gildan Activewear  vs.  Ralph Lauren

Gildan Activewear

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gildan Activewear are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gildan Activewear may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ralph Lauren

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ralph Lauren are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ralph Lauren reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gildan Activewear and Ralph Lauren

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

The idea behind Gildan Activewear and Ralph Lauren 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.