Correlation Between Signet Jewelers and Gildan Activewear

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

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

Diversification Opportunities for Signet Jewelers and Gildan Activewear

-0.23

Correlation Coefficient

Signet Jewelers  Gildan Activewear

Very good diversification

The 3 months correlation between Signet and Gildan is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Signet Jewelers and Gildan Activewear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gildan Activewear and Signet Jewelers 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 Signet Jewelers 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 Signet Jewelers i.e., Signet Jewelers and Gildan Activewear go up and down completely randomly.

Pair Corralation between Signet Jewelers and Gildan Activewear

Considering the 90-day investment horizon Signet Jewelers is expected to generate 2.48 times more return on investment than Gildan Activewear. However, Signet Jewelers is 2.48 times more volatile than Gildan Activewear. It trades about 0.06 of its potential returns per unit of risk. Gildan Activewear is currently generating about -0.18 per unit of risk. If you would invest  9,842  in Signet Jewelers on January 30, 2024 and sell it today you would earn a total of  338.00  from holding Signet Jewelers or generate 3.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Signet Jewelers  vs.  Gildan Activewear

Signet Jewelers

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Signet Jewelers are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, Signet Jewelers is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Gildan Activewear

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gildan Activewear are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, Gildan Activewear is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Signet Jewelers and Gildan Activewear

The main advantage of trading using opposite Signet Jewelers and Gildan Activewear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Signet Jewelers 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 Signet Jewelers 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.

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.