Correlation Between Hanesbrands and Transamerica Large

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

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

Diversification Opportunities for Hanesbrands and Transamerica Large

0.95

Correlation Coefficient

Hanesbrands  Transamerica Large

Almost no diversification

The 3 months correlation between Hanesbrands and Transamerica is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Hanesbrands and Transamerica Large Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Large Value 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 Transamerica Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Large Value has no effect on the direction of Hanesbrands i.e., Hanesbrands and Transamerica Large go up and down completely randomly.

Pair Corralation between Hanesbrands and Transamerica Large

Considering the 90-day investment horizon Hanesbrands is expected to generate 4.79 times more return on investment than Transamerica Large. However, Hanesbrands is 4.79 times more volatile than Transamerica Large Value. It trades about 0.13 of its potential returns per unit of risk. Transamerica Large Value is currently generating about -0.06 per unit of risk. If you would invest  798.00  in Hanesbrands on September 13, 2024 and sell it today you would earn a total of  43.00  from holding Hanesbrands or generate 5.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Hanesbrands  vs.  Transamerica Large Value

Hanesbrands

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hanesbrands are ranked lower than 10 (%) 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.

Transamerica Large Value

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transamerica Large Value are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Transamerica Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hanesbrands and Transamerica Large

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

The idea behind Hanesbrands and Transamerica Large Value 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.