Correlation Between Hanesbrands and IShares China

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

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

Diversification Opportunities for Hanesbrands and IShares China

-0.89

Correlation Coefficient

Hanesbrands  IShares China

Pay attention - limited upside

The 3 months correlation between Hanesbrands and IShares is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Hanesbrands and iShares China Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares China Large 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 IShares China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares China Large has no effect on the direction of Hanesbrands i.e., Hanesbrands and IShares China go up and down completely randomly.

Pair Corralation between Hanesbrands and IShares China

Considering the 90-day investment horizon Hanesbrands is expected to under-perform the IShares China. In addition to that, Hanesbrands is 1.76 times more volatile than iShares China Large. It trades about -0.18 of its total potential returns per unit of risk. iShares China Large is currently generating about 0.17 per unit of volatility. If you would invest  8,516  in iShares China Large on December 2, 2024 and sell it today you would earn a total of  1,572  from holding iShares China Large or generate 18.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	96.72%
Values	Daily Returns

Hanesbrands  vs.  iShares China Large

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.

iShares China Large

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares China Large are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, IShares China showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hanesbrands and IShares China

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

The idea behind Hanesbrands and iShares China Large 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.