Correlation Between Gap and Sysco

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

By analyzing existing cross correlation between Gap Inc and Sysco, you can compare the effects of market volatilities on Gap and Sysco 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 Gap with a short position of Sysco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gap and Sysco.

Diversification Opportunities for Gap and Sysco

0.29

Correlation Coefficient

Gap  Sysco

Modest diversification

The 3 months correlation between Gap and Sysco is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Gap Inc and Sysco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sysco and Gap 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 Gap Inc are associated (or correlated) with Sysco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sysco has no effect on the direction of Gap i.e., Gap and Sysco go up and down completely randomly.

Pair Corralation between Gap and Sysco

Considering the 90-day investment horizon Gap Inc is expected to under-perform the Sysco. In addition to that, Gap is 1.64 times more volatile than Sysco. It trades about -0.81 of its total potential returns per unit of risk. Sysco is currently generating about -0.16 per unit of volatility. If you would invest  8,039  in Sysco on January 26, 2024 and sell it today you would lose (310.00) from holding Sysco or give up 3.86% of portfolio value over 90 days.

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

Gap Inc  vs.  Sysco

Gap Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gap Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Gap is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Sysco

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sysco are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Sysco is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gap and Sysco

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

The idea behind Gap Inc and Sysco 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.