Correlation Between Gildan Activewear and Advent Wireless

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Can any of the company-specific risk be diversified away by investing in both Gildan Activewear and Advent Wireless 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 Advent Wireless into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gildan Activewear and Advent Wireless, you can compare the effects of market volatilities on Gildan Activewear and Advent Wireless 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 Advent Wireless. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gildan Activewear and Advent Wireless.

Diversification Opportunities for Gildan Activewear and Advent Wireless

-0.68
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Gildan and Advent is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Gildan Activewear and Advent Wireless in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advent Wireless 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 Advent Wireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advent Wireless has no effect on the direction of Gildan Activewear i.e., Gildan Activewear and Advent Wireless go up and down completely randomly.

Pair Corralation between Gildan Activewear and Advent Wireless

Assuming the 90 days trading horizon Gildan Activewear is expected to generate 0.87 times more return on investment than Advent Wireless. However, Gildan Activewear is 1.15 times less risky than Advent Wireless. It trades about 0.01 of its potential returns per unit of risk. Advent Wireless is currently generating about 0.0 per unit of risk. If you would invest  4,730  in Gildan Activewear on December 6, 2023 and sell it today you would lose (45.00) from holding Gildan Activewear or give up 0.95% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Gildan Activewear  vs.  Advent Wireless

 Performance 
       Timeline  
Gildan Activewear 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
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 newest stock price disarray, may contribute to short-term losses for the investors.
Advent Wireless 

Risk-Adjusted Performance

10 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Advent Wireless are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Advent Wireless is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Gildan Activewear and Advent Wireless Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Gildan Activewear and Advent Wireless

The main advantage of trading using opposite Gildan Activewear and Advent Wireless positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gildan Activewear position performs unexpectedly, Advent Wireless 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 Advent Wireless will offset losses from the drop in Advent Wireless' long position.
The idea behind Gildan Activewear and Advent Wireless 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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