Correlation Between Hanesbrands and Walmart

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

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

Diversification Opportunities for Hanesbrands and Walmart

0.9

Correlation Coefficient

Hanesbrands  Walmart

Almost no diversification

The 3 months correlation between Hanesbrands and Walmart is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Hanesbrands and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Hanesbrands i.e., Hanesbrands and Walmart go up and down completely randomly.

Pair Corralation between Hanesbrands and Walmart

Considering the 90-day investment horizon Hanesbrands is expected to generate 2.67 times more return on investment than Walmart. However, Hanesbrands is 2.67 times more volatile than Walmart. It trades about 0.17 of its potential returns per unit of risk. Walmart is currently generating about 0.3 per unit of risk. If you would invest  634.00  in Hanesbrands on September 3, 2024 and sell it today you would earn a total of  236.00  from holding Hanesbrands or generate 37.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.46%
Values	Daily Returns

Hanesbrands  vs.  Walmart

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.

Walmart

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Walmart reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hanesbrands and Walmart

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

The idea behind Hanesbrands and Walmart 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..