Correlation Between Gildan Activewear and Transcontinental

Can any of the company-specific risk be diversified away by investing in both Gildan Activewear and Transcontinental 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 Transcontinental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gildan Activewear and Transcontinental, you can compare the effects of market volatilities on Gildan Activewear and Transcontinental 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 Transcontinental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gildan Activewear and Transcontinental.

Diversification Opportunities for Gildan Activewear and Transcontinental

0.72

Correlation Coefficient

Gildan Activewear  Transcontinental

Poor diversification

The 3 months correlation between Gildan and Transcontinental is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Gildan Activewear and Transcontinental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcontinental 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 Transcontinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transcontinental has no effect on the direction of Gildan Activewear i.e., Gildan Activewear and Transcontinental go up and down completely randomly.

Pair Corralation between Gildan Activewear and Transcontinental

Assuming the 90 days trading horizon Gildan Activewear is expected to generate 1.52 times more return on investment than Transcontinental. However, Gildan Activewear is 1.52 times more volatile than Transcontinental. It trades about 0.2 of its potential returns per unit of risk. Transcontinental is currently generating about 0.18 per unit of risk. If you would invest  5,760  in Gildan Activewear on April 22, 2025 and sell it today you would earn a total of  1,430  from holding Gildan Activewear or generate 24.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Gildan Activewear  vs.  Transcontinental

Gildan Activewear

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gildan Activewear are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Gildan Activewear displayed solid returns over the last few months and may actually be approaching a breakup point.

Transcontinental

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transcontinental are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Transcontinental unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gildan Activewear and Transcontinental

The main advantage of trading using opposite Gildan Activewear and Transcontinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gildan Activewear position performs unexpectedly, Transcontinental 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 Transcontinental will offset losses from the drop in Transcontinental's long position.

The idea behind Gildan Activewear and Transcontinental 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.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.