Correlation Between Restaurant Brands and Gildan Activewear
Can any of the company-specific risk be diversified away by investing in both Restaurant Brands 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 Restaurant Brands and Gildan Activewear into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Restaurant Brands International and Gildan Activewear, you can compare the effects of market volatilities on Restaurant Brands 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 Restaurant Brands with a short position of Gildan Activewear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Restaurant Brands and Gildan Activewear.
Diversification Opportunities for Restaurant Brands and Gildan Activewear
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Restaurant and Gildan is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Restaurant Brands Internationa and Gildan Activewear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gildan Activewear and Restaurant Brands 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 Restaurant Brands International 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 Restaurant Brands i.e., Restaurant Brands and Gildan Activewear go up and down completely randomly.
Pair Corralation between Restaurant Brands and Gildan Activewear
Assuming the 90 days trading horizon Restaurant Brands International is expected to under-perform the Gildan Activewear. But the stock apears to be less risky and, when comparing its historical volatility, Restaurant Brands International is 1.08 times less risky than Gildan Activewear. The stock trades about -0.01 of its potential returns per unit of risk. The Gildan Activewear is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 4,348 in Gildan Activewear on August 28, 2024 and sell it today you would earn a total of 2,642 from holding Gildan Activewear or generate 60.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Restaurant Brands Internationa vs. Gildan Activewear
Performance |
| Timeline |
| Restaurant Brands |
| Gildan Activewear |
Restaurant Brands and Gildan Activewear Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Restaurant Brands and Gildan Activewear
The main advantage of trading using opposite Restaurant Brands and Gildan Activewear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Restaurant Brands 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.| Restaurant Brands vs. Canadian Tire | Restaurant Brands vs. Dollarama | Restaurant Brands vs. Nutrien | Restaurant Brands vs. Magna International |
| 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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