Correlation Between Hanesbrands and BP Plastics

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

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

Diversification Opportunities for Hanesbrands and BP Plastics

0.74

Correlation Coefficient

Hanesbrands  BP Plastics

Poor diversification

The 3 months correlation between Hanesbrands and 5100 is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Hanesbrands and BP Plastics Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP Plastics Holding 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 BP Plastics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP Plastics Holding has no effect on the direction of Hanesbrands i.e., Hanesbrands and BP Plastics go up and down completely randomly.

Pair Corralation between Hanesbrands and BP Plastics

Considering the 90-day investment horizon Hanesbrands is expected to under-perform the BP Plastics. In addition to that, Hanesbrands is 1.71 times more volatile than BP Plastics Holding. It trades about -0.16 of its total potential returns per unit of risk. BP Plastics Holding is currently generating about -0.1 per unit of volatility. If you would invest  120.00  in BP Plastics Holding on December 30, 2024 and sell it today you would lose (14.00) from holding BP Plastics Holding or give up 11.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Hanesbrands  vs.  BP Plastics Holding

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.

BP Plastics Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days BP Plastics Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Hanesbrands and BP Plastics

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

The idea behind Hanesbrands and BP Plastics Holding 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.