Correlation Between Gildan Activewear and BRP
Can any of the company-specific risk be diversified away by investing in both Gildan Activewear and BRP 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 BRP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gildan Activewear and BRP Inc, you can compare the effects of market volatilities on Gildan Activewear and BRP 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 BRP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gildan Activewear and BRP.
Diversification Opportunities for Gildan Activewear and BRP
-0.89 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Gildan and BRP is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Gildan Activewear and BRP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRP Inc 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 BRP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRP Inc has no effect on the direction of Gildan Activewear i.e., Gildan Activewear and BRP go up and down completely randomly.
Pair Corralation between Gildan Activewear and BRP
Assuming the 90 days trading horizon Gildan Activewear is expected to generate 0.44 times more return on investment than BRP. However, Gildan Activewear is 2.29 times less risky than BRP. It trades about 0.25 of its potential returns per unit of risk. BRP Inc is currently generating about -0.07 per unit of risk. If you would invest 5,092 in Gildan Activewear on September 1, 2024 and sell it today you would earn a total of 1,868 from holding Gildan Activewear or generate 36.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gildan Activewear vs. BRP Inc
Performance |
| Timeline |
| Gildan Activewear |
| BRP Inc |
Gildan Activewear and BRP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gildan Activewear and BRP
The main advantage of trading using opposite Gildan Activewear and BRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gildan Activewear position performs unexpectedly, BRP 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 BRP will offset losses from the drop in BRP's long position.| 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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