Correlation Between Hanesbrands and CardioComm Solutions

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

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

Diversification Opportunities for Hanesbrands and CardioComm Solutions

0.66

Correlation Coefficient

Hanesbrands  CardioComm Solutions

Poor diversification

The 3 months correlation between Hanesbrands and CardioComm is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Hanesbrands and CardioComm Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CardioComm Solutions 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 CardioComm Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CardioComm Solutions has no effect on the direction of Hanesbrands i.e., Hanesbrands and CardioComm Solutions go up and down completely randomly.

Pair Corralation between Hanesbrands and CardioComm Solutions

Considering the 90-day investment horizon Hanesbrands is expected to generate 1.37 times more return on investment than CardioComm Solutions. However, Hanesbrands is 1.37 times more volatile than CardioComm Solutions. It trades about 0.18 of its potential returns per unit of risk. CardioComm Solutions is currently generating about 0.16 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	Significant
Accuracy	100.0%
Values	Daily Returns

Hanesbrands  vs.  CardioComm Solutions

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.

CardioComm Solutions

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CardioComm Solutions are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting technical and fundamental indicators, CardioComm Solutions reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hanesbrands and CardioComm Solutions

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

The idea behind Hanesbrands and CardioComm Solutions 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.