Correlation Between Hanesbrands and ADX

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

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

Diversification Opportunities for Hanesbrands and ADX

0.81

Correlation Coefficient

Hanesbrands  ADX

Very poor diversification

The 3 months correlation between Hanesbrands and ADX is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Hanesbrands and ADX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADX 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 ADX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADX has no effect on the direction of Hanesbrands i.e., Hanesbrands and ADX go up and down completely randomly.

Pair Corralation between Hanesbrands and ADX

Considering the 90-day investment horizon Hanesbrands is expected to generate 1.4 times less return on investment than ADX. But when comparing it to its historical volatility, Hanesbrands is 1.74 times less risky than ADX. It trades about 0.15 of its potential returns per unit of risk. ADX is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  15.00  in ADX on September 12, 2024 and sell it today you would earn a total of  6.00  from holding ADX or generate 40.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Hanesbrands  vs.  ADX

Hanesbrands

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hanesbrands are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting fundamental drivers, Hanesbrands demonstrated solid returns over the last few months and may actually be approaching a breakup point.

ADX

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ADX are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, ADX exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hanesbrands and ADX

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

The idea behind Hanesbrands and ADX 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.