Correlation Between Hanesbrands and Cyclo Therapeutics

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

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

Diversification Opportunities for Hanesbrands and Cyclo Therapeutics

-0.07

Correlation Coefficient

Hanesbrands  Cyclo Therapeutics

Good diversification

The 3 months correlation between Hanesbrands and Cyclo is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Hanesbrands and Cyclo Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cyclo Therapeutics 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 Cyclo Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cyclo Therapeutics has no effect on the direction of Hanesbrands i.e., Hanesbrands and Cyclo Therapeutics go up and down completely randomly.

Pair Corralation between Hanesbrands and Cyclo Therapeutics

Considering the 90-day investment horizon Hanesbrands is expected to generate 0.57 times more return on investment than Cyclo Therapeutics. However, Hanesbrands is 1.76 times less risky than Cyclo Therapeutics. It trades about 0.04 of its potential returns per unit of risk. Cyclo Therapeutics is currently generating about 0.0 per unit of risk. If you would invest  629.00  in Hanesbrands on September 4, 2024 and sell it today you would earn a total of  238.00  from holding Hanesbrands or generate 37.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Hanesbrands  vs.  Cyclo Therapeutics

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.

Cyclo Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cyclo Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Cyclo Therapeutics is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Hanesbrands and Cyclo Therapeutics

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

The idea behind Hanesbrands and Cyclo Therapeutics 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.