Correlation Between Hanesbrands and Provident Bancorp

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

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

Diversification Opportunities for Hanesbrands and Provident Bancorp

0.7

Correlation Coefficient

Hanesbrands  Provident Bancorp

Poor diversification

The 3 months correlation between Hanesbrands and Provident is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Hanesbrands and Provident Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Provident Bancorp 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 Provident Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Provident Bancorp has no effect on the direction of Hanesbrands i.e., Hanesbrands and Provident Bancorp go up and down completely randomly.

Pair Corralation between Hanesbrands and Provident Bancorp

Considering the 90-day investment horizon Hanesbrands is expected to generate 1.85 times more return on investment than Provident Bancorp. However, Hanesbrands is 1.85 times more volatile than Provident Bancorp. It trades about 0.18 of its potential returns per unit of risk. Provident Bancorp is currently generating about 0.12 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	98.44%
Values	Daily Returns

Hanesbrands  vs.  Provident Bancorp

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.

Provident Bancorp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Provident Bancorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental drivers, Provident Bancorp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hanesbrands and Provident Bancorp

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

The idea behind Hanesbrands and Provident Bancorp 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.