Correlation Between Hanesbrands and Covalon Technologies

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

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

Diversification Opportunities for Hanesbrands and Covalon Technologies

0.84

Correlation Coefficient

Hanesbrands  Covalon Technologies

Very poor diversification

The 3 months correlation between Hanesbrands and Covalon is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Hanesbrands and Covalon Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covalon Technologies 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 Covalon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covalon Technologies has no effect on the direction of Hanesbrands i.e., Hanesbrands and Covalon Technologies go up and down completely randomly.

Pair Corralation between Hanesbrands and Covalon Technologies

Considering the 90-day investment horizon Hanesbrands is expected to under-perform the Covalon Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Hanesbrands is 1.17 times less risky than Covalon Technologies. The stock trades about -0.16 of its potential returns per unit of risk. The Covalon Technologies is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  325.00  in Covalon Technologies on December 30, 2024 and sell it today you would lose (98.00) from holding Covalon Technologies or give up 30.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.88%
Values	Daily Returns

Hanesbrands  vs.  Covalon Technologies

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.

Covalon Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Covalon Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Hanesbrands and Covalon Technologies

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

The idea behind Hanesbrands and Covalon Technologies 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.