Correlation Between Hanesbrands and ISE Commerce

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

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

Diversification Opportunities for Hanesbrands and ISE Commerce

0.17

Correlation Coefficient

Hanesbrands  ISE Commerce

Average diversification

The 3 months correlation between Hanesbrands and ISE is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Hanesbrands and ISE Commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ISE Commerce and Hanesbrands 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 Hanesbrands are associated (or correlated) with ISE Commerce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ISE Commerce has no effect on the direction of Hanesbrands i.e., Hanesbrands and ISE Commerce go up and down completely randomly.

Pair Corralation between Hanesbrands and ISE Commerce

Considering the 90-day investment horizon Hanesbrands is expected to under-perform the ISE Commerce. But the stock apears to be less risky and, when comparing its historical volatility, Hanesbrands is 2.97 times less risky than ISE Commerce. The stock trades about -0.15 of its potential returns per unit of risk. The ISE Commerce is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  90,300  in ISE Commerce on December 28, 2024 and sell it today you would earn a total of  7,900  from holding ISE Commerce or generate 8.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Hanesbrands  vs.  ISE Commerce

Hanesbrands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hanesbrands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

ISE Commerce

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ISE Commerce are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ISE Commerce sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hanesbrands and ISE Commerce

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

The idea behind Hanesbrands and ISE Commerce 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.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.