Correlation Between George Weston and Gildan Activewear

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

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

Diversification Opportunities for George Weston and Gildan Activewear

-0.34

Correlation Coefficient

George Weston  Gildan Activewear

Very good diversification

The 3 months correlation between George and Gildan is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding George Weston Limited and Gildan Activewear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gildan Activewear and George Weston 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 George Weston Limited 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 George Weston i.e., George Weston and Gildan Activewear go up and down completely randomly.

Pair Corralation between George Weston and Gildan Activewear

Assuming the 90 days horizon George Weston Limited is expected to generate 0.81 times more return on investment than Gildan Activewear. However, George Weston Limited is 1.24 times less risky than Gildan Activewear. It trades about 0.1 of its potential returns per unit of risk. Gildan Activewear is currently generating about -0.02 per unit of risk. If you would invest  22,288  in George Weston Limited on December 30, 2024 and sell it today you would earn a total of  1,710  from holding George Weston Limited or generate 7.67% return on investment over 90 days.

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

George Weston Limited  vs.  Gildan Activewear

George Weston Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in George Weston Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, George Weston may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 George Weston and Gildan Activewear

The main advantage of trading using opposite George Weston and Gildan Activewear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if George Weston 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 George Weston Limited 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.