Correlation Between Hanesbrands and Topicus

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

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

Diversification Opportunities for Hanesbrands and Topicus

-0.73

Correlation Coefficient

Hanesbrands  Topicus

Pay attention - limited upside

The 3 months correlation between Hanesbrands and Topicus is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Hanesbrands and Topicus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topicus 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 Topicus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topicus has no effect on the direction of Hanesbrands i.e., Hanesbrands and Topicus go up and down completely randomly.

Pair Corralation between Hanesbrands and Topicus

Considering the 90-day investment horizon Hanesbrands is expected to generate 2.22 times more return on investment than Topicus. However, Hanesbrands is 2.22 times more volatile than Topicus. It trades about 0.18 of its potential returns per unit of risk. Topicus is currently generating about -0.04 per unit of risk. If you would invest  645.00  in Hanesbrands on September 4, 2024 and sell it today you would earn a total of  246.00  from holding Hanesbrands or generate 38.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Hanesbrands  vs.  Topicus

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.

Topicus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Topicus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Topicus is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Hanesbrands and Topicus

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

The idea behind Hanesbrands and Topicus 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.