Correlation Between Hanesbrands and UST Inc

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

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

Diversification Opportunities for Hanesbrands and UST Inc

0.89

Correlation Coefficient

Hanesbrands  UST Inc

Very poor diversification

The 3 months correlation between Hanesbrands and UST is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Hanesbrands and Multi Units Luxembourg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Units Luxembourg 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 UST Inc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Units Luxembourg has no effect on the direction of Hanesbrands i.e., Hanesbrands and UST Inc go up and down completely randomly.

Pair Corralation between Hanesbrands and UST Inc

Considering the 90-day investment horizon Hanesbrands is expected to generate 2.94 times more return on investment than UST Inc. However, Hanesbrands is 2.94 times more volatile than Multi Units Luxembourg . It trades about 0.18 of its potential returns per unit of risk. Multi Units Luxembourg is currently generating about 0.24 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 Together
Strength	Strong
Accuracy	96.92%
Values	Daily Returns

Hanesbrands  vs.  Multi Units Luxembourg

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.

Multi Units Luxembourg

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Units Luxembourg are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, UST Inc sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hanesbrands and UST Inc

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

The idea behind Hanesbrands and Multi Units Luxembourg 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.