Correlation Between Citigroup and Gildan Activewear
Can any of the company-specific risk be diversified away by investing in both Citigroup 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 Citigroup and Gildan Activewear into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Gildan Activewear, you can compare the effects of market volatilities on Citigroup 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 Citigroup with a short position of Gildan Activewear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Gildan Activewear.
Diversification Opportunities for Citigroup and Gildan Activewear
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Citigroup and Gildan is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Gildan Activewear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gildan Activewear and Citigroup 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 Citigroup 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 Citigroup i.e., Citigroup and Gildan Activewear go up and down completely randomly.
Pair Corralation between Citigroup and Gildan Activewear
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.28 times less return on investment than Gildan Activewear. But when comparing it to its historical volatility, Citigroup is 1.07 times less risky than Gildan Activewear. It trades about 0.07 of its potential returns per unit of risk. Gildan Activewear is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,730 in Gildan Activewear on August 28, 2024 and sell it today you would earn a total of 3,260 from holding Gildan Activewear or generate 87.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Gildan Activewear
Performance |
| Timeline |
| Citigroup |
| Gildan Activewear |
Citigroup and Gildan Activewear Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Gildan Activewear
The main advantage of trading using opposite Citigroup and Gildan Activewear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup 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 Citigroup 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.| Gildan Activewear vs. Saputo Inc | Gildan Activewear vs. CCL Industries | Gildan Activewear vs. Thomson Reuters Corp | Gildan Activewear vs. George Weston Limited |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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