Correlation Between Hanesbrands and Top Wealth

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

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

Diversification Opportunities for Hanesbrands and Top Wealth

-0.18

Correlation Coefficient

Hanesbrands  Top Wealth

Good diversification

The 3 months correlation between Hanesbrands and Top is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Hanesbrands and Top Wealth Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Top Wealth Group 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 Top Wealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Top Wealth Group has no effect on the direction of Hanesbrands i.e., Hanesbrands and Top Wealth go up and down completely randomly.

Pair Corralation between Hanesbrands and Top Wealth

Considering the 90-day investment horizon Hanesbrands is expected to generate 57.69 times less return on investment than Top Wealth. But when comparing it to its historical volatility, Hanesbrands is 22.77 times less risky than Top Wealth. It trades about 0.04 of its potential returns per unit of risk. Top Wealth Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Top Wealth Group on September 4, 2024 and sell it today you would earn a total of  28.00  from holding Top Wealth Group or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	32.73%
Values	Daily Returns

Hanesbrands  vs.  Top Wealth Group

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.

Top Wealth Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Top Wealth Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Top Wealth reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hanesbrands and Top Wealth

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

The idea behind Hanesbrands and Top Wealth Group 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.

Check out your portfolio center.

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.