Correlation Between Hanesbrands and First Trust

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

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

Diversification Opportunities for Hanesbrands and First Trust

-0.66

Correlation Coefficient

Hanesbrands  First Trust

Excellent diversification

The 3 months correlation between Hanesbrands and First is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Hanesbrands and First Trust TCW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust TCW 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust TCW has no effect on the direction of Hanesbrands i.e., Hanesbrands and First Trust go up and down completely randomly.

Pair Corralation between Hanesbrands and First Trust

Considering the 90-day investment horizon Hanesbrands is expected to generate 11.16 times more return on investment than First Trust. However, Hanesbrands is 11.16 times more volatile than First Trust TCW. It trades about 0.26 of its potential returns per unit of risk. First Trust TCW is currently generating about 0.07 per unit of risk. If you would invest  712.00  in Hanesbrands on September 4, 2024 and sell it today you would earn a total of  179.00  from holding Hanesbrands or generate 25.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Hanesbrands  vs.  First Trust TCW

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.

First Trust TCW

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust TCW has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, First Trust is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Hanesbrands and First Trust

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

The idea behind Hanesbrands and First Trust TCW 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.