Correlation Between Hanesbrands and Prudential Government

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

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

Diversification Opportunities for Hanesbrands and Prudential Government

-0.64

Correlation Coefficient

Hanesbrands  Prudential Government

Excellent diversification

The 3 months correlation between Hanesbrands and Prudential is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Hanesbrands and Prudential Government Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Government 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 Prudential Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Government has no effect on the direction of Hanesbrands i.e., Hanesbrands and Prudential Government go up and down completely randomly.

Pair Corralation between Hanesbrands and Prudential Government

Considering the 90-day investment horizon Hanesbrands is expected to generate 10.39 times more return on investment than Prudential Government. However, Hanesbrands is 10.39 times more volatile than Prudential Government Income. It trades about 0.17 of its potential returns per unit of risk. Prudential Government Income is currently generating about -0.11 per unit of risk. If you would invest  638.00  in Hanesbrands on September 5, 2024 and sell it today you would earn a total of  229.00  from holding Hanesbrands or generate 35.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Hanesbrands  vs.  Prudential Government Income

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.

Prudential Government

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Government Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Prudential Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hanesbrands and Prudential Government

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

The idea behind Hanesbrands and Prudential Government Income 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.