Correlation Between Hanesbrands and AerCap Holdings

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

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

Diversification Opportunities for Hanesbrands and AerCap Holdings

0.86

Correlation Coefficient

Hanesbrands  AerCap Holdings

Very poor diversification

The 3 months correlation between Hanesbrands and AerCap is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Hanesbrands and AerCap Holdings NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AerCap Holdings NV 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 AerCap Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AerCap Holdings NV has no effect on the direction of Hanesbrands i.e., Hanesbrands and AerCap Holdings go up and down completely randomly.

Pair Corralation between Hanesbrands and AerCap Holdings

Considering the 90-day investment horizon Hanesbrands is expected to generate 2.3 times more return on investment than AerCap Holdings. However, Hanesbrands is 2.3 times more volatile than AerCap Holdings NV. It trades about 0.17 of its potential returns per unit of risk. AerCap Holdings NV is currently generating about 0.16 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 Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Hanesbrands  vs.  AerCap Holdings NV

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.

AerCap Holdings NV

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Hanesbrands and AerCap Holdings

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

The idea behind Hanesbrands and AerCap Holdings NV 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.