Correlation Between Hanesbrands and Africa Energy

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

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

Diversification Opportunities for Hanesbrands and Africa Energy

-0.03

Correlation Coefficient

Hanesbrands  Africa Energy

Good diversification

The 3 months correlation between Hanesbrands and Africa is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Hanesbrands and Africa Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Africa Energy Corp 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 Africa Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Africa Energy Corp has no effect on the direction of Hanesbrands i.e., Hanesbrands and Africa Energy go up and down completely randomly.

Pair Corralation between Hanesbrands and Africa Energy

Considering the 90-day investment horizon Hanesbrands is expected to generate 0.89 times more return on investment than Africa Energy. However, Hanesbrands is 1.12 times less risky than Africa Energy. It trades about 0.17 of its potential returns per unit of risk. Africa Energy Corp is currently generating about 0.0 per unit of risk. If you would invest  640.00  in Hanesbrands on September 12, 2024 and sell it today you would earn a total of  226.00  from holding Hanesbrands or generate 35.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Hanesbrands  vs.  Africa Energy Corp

Hanesbrands

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hanesbrands are ranked lower than 13 (%) 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.

Africa Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Africa Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Africa Energy is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Hanesbrands and Africa Energy

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

The idea behind Hanesbrands and Africa Energy Corp 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.