Correlation Between Hanesbrands and BM European
Can any of the company-specific risk be diversified away by investing in both Hanesbrands and BM European 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 BM European into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hanesbrands and BM European Value, you can compare the effects of market volatilities on Hanesbrands and BM European 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 BM European. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanesbrands and BM European.
Diversification Opportunities for Hanesbrands and BM European
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hanesbrands and BMRRY is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Hanesbrands and BM European Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BM European Value 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 BM European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BM European Value has no effect on the direction of Hanesbrands i.e., Hanesbrands and BM European go up and down completely randomly.
Pair Corralation between Hanesbrands and BM European
Considering the 90-day investment horizon Hanesbrands is expected to generate 1.91 times more return on investment than BM European. However, Hanesbrands is 1.91 times more volatile than BM European Value. It trades about 0.03 of its potential returns per unit of risk. BM European Value is currently generating about -0.04 per unit of risk. If you would invest 506.00 in Hanesbrands on December 2, 2024 and sell it today you would earn a total of 97.00 from holding Hanesbrands or generate 19.17% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Hanesbrands vs. BM European Value
Performance |
Timeline |
Hanesbrands |
BM European Value |
Hanesbrands and BM European Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Hanesbrands and BM European
The main advantage of trading using opposite Hanesbrands and BM European positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hanesbrands position performs unexpectedly, BM European 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 BM European will offset losses from the drop in BM European's long position.Hanesbrands vs. Ralph Lauren Corp | Hanesbrands vs. Levi Strauss Co | Hanesbrands vs. Under Armour C | Hanesbrands vs. PVH Corp |
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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