Correlation Between Hanesbrands and Invesco Solar

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

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

Diversification Opportunities for Hanesbrands and Invesco Solar

-0.65

Correlation Coefficient

Hanesbrands  Invesco Solar

Excellent diversification

The 3 months correlation between Hanesbrands and Invesco is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Hanesbrands and Invesco Solar Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Solar Energy 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 Invesco Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Solar Energy has no effect on the direction of Hanesbrands i.e., Hanesbrands and Invesco Solar go up and down completely randomly.

Pair Corralation between Hanesbrands and Invesco Solar

Considering the 90-day investment horizon Hanesbrands is expected to generate 1.68 times more return on investment than Invesco Solar. However, Hanesbrands is 1.68 times more volatile than Invesco Solar Energy. It trades about 0.21 of its potential returns per unit of risk. Invesco Solar Energy is currently generating about -0.16 per unit of risk. If you would invest  712.00  in Hanesbrands on September 5, 2024 and sell it today you would earn a total of  146.00  from holding Hanesbrands or generate 20.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Hanesbrands  vs.  Invesco Solar Energy

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.

Invesco Solar Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Solar Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Invesco Solar is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Hanesbrands and Invesco Solar

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

The idea behind Hanesbrands and Invesco Solar Energy 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.