Correlation Between Hanesbrands and Galway Metals

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

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

Diversification Opportunities for Hanesbrands and Galway Metals

0.29

Correlation Coefficient

Hanesbrands  Galway Metals

Modest diversification

The 3 months correlation between Hanesbrands and Galway is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Hanesbrands and Galway Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galway Metals 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 Galway Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galway Metals has no effect on the direction of Hanesbrands i.e., Hanesbrands and Galway Metals go up and down completely randomly.

Pair Corralation between Hanesbrands and Galway Metals

Considering the 90-day investment horizon Hanesbrands is expected to under-perform the Galway Metals. But the stock apears to be less risky and, when comparing its historical volatility, Hanesbrands is 1.56 times less risky than Galway Metals. The stock trades about -0.16 of its potential returns per unit of risk. The Galway Metals is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  52.00  in Galway Metals on December 30, 2024 and sell it today you would lose (9.00) from holding Galway Metals or give up 17.31% of portfolio value over 90 days.

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

Hanesbrands  vs.  Galway Metals

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.

Galway Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Galway Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Hanesbrands and Galway Metals

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

The idea behind Hanesbrands and Galway Metals 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.