Correlation Between Willow Biosciences and Gildan Activewear

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

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

Diversification Opportunities for Willow Biosciences and Gildan Activewear

-0.54

Correlation Coefficient

Willow Biosciences  Gildan Activewear

Excellent diversification

The 3 months correlation between Willow and Gildan is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Willow Biosciences and Gildan Activewear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gildan Activewear and Willow Biosciences 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 Willow Biosciences 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 Willow Biosciences i.e., Willow Biosciences and Gildan Activewear go up and down completely randomly.

Pair Corralation between Willow Biosciences and Gildan Activewear

Assuming the 90 days trading horizon Willow Biosciences is expected to under-perform the Gildan Activewear. In addition to that, Willow Biosciences is 8.79 times more volatile than Gildan Activewear. It trades about 0.0 of its total potential returns per unit of risk. Gildan Activewear is currently generating about -0.03 per unit of volatility. If you would invest  6,680  in Gildan Activewear on December 22, 2024 and sell it today you would lose (207.00) from holding Gildan Activewear or give up 3.1% of portfolio value over 90 days.

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

Willow Biosciences  vs.  Gildan Activewear

Willow Biosciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days Willow Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Willow Biosciences is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

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. 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 Willow Biosciences and Gildan Activewear

The main advantage of trading using opposite Willow Biosciences and Gildan Activewear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Willow Biosciences 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 Willow Biosciences 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..