Correlation Between Ford and Gildan Activewear
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Gildan Activewear into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Gildan Activewear, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Gildan Activewear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Gildan Activewear.
Diversification Opportunities for Ford and Gildan Activewear
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Ford and Gildan is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Gildan Activewear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gildan Activewear and Ford 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 Ford Motor 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 Ford i.e., Ford and Gildan Activewear go up and down completely randomly.
Pair Corralation between Ford and Gildan Activewear
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Gildan Activewear. In addition to that, Ford is 2.65 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 0.26 per unit of volatility. If you would invest 4,681 in Gildan Activewear on August 24, 2024 and sell it today you would earn a total of 267.00 from holding Gildan Activewear or generate 5.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Gildan Activewear
Performance |
| Timeline |
| Ford Motor |
| Gildan Activewear |
Ford and Gildan Activewear Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Gildan Activewear
The main advantage of trading using opposite Ford and Gildan Activewear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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. Vince Holding Corp | Gildan Activewear vs. Ermenegildo Zegna NV | Gildan Activewear vs. Columbia Sportswear | Gildan Activewear vs. G III Apparel Group |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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