Correlation Between H M and Hanesbrands

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

By analyzing existing cross correlation between H M Hennes and Hanesbrands, you can compare the effects of market volatilities on H M and Hanesbrands 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 H M with a short position of Hanesbrands. Check out your portfolio center. Please also check ongoing floating volatility patterns of H M and Hanesbrands.

Diversification Opportunities for H M and Hanesbrands

-0.25

Correlation Coefficient

H M  Hanesbrands

Very good diversification

The 3 months correlation between HMRZF and Hanesbrands is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding H M Hennes and Hanesbrands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanesbrands and H M 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 H M Hennes are associated (or correlated) with Hanesbrands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanesbrands has no effect on the direction of H M i.e., H M and Hanesbrands go up and down completely randomly.

Pair Corralation between H M and Hanesbrands

Assuming the 90 days horizon H M is expected to generate 2.05 times less return on investment than Hanesbrands. But when comparing it to its historical volatility, H M Hennes is 1.1 times less risky than Hanesbrands. It trades about 0.02 of its potential returns per unit of risk. Hanesbrands is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  608.00  in Hanesbrands on October 26, 2024 and sell it today you would earn a total of  227.00  from holding Hanesbrands or generate 37.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	67.21%
Values	Daily Returns

H M Hennes  vs.  Hanesbrands

H M Hennes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days H M Hennes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Hanesbrands

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hanesbrands are ranked lower than 7 (%) 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.

Pair Trading with H M and Hanesbrands

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

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