Correlation Between Hanesbrands and Siam Commercial

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

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

Diversification Opportunities for Hanesbrands and Siam Commercial

0.16

Correlation Coefficient

Hanesbrands  Siam Commercial

Average diversification

The 3 months correlation between Hanesbrands and Siam is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Hanesbrands and The Siam Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siam Commercial 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 Siam Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siam Commercial has no effect on the direction of Hanesbrands i.e., Hanesbrands and Siam Commercial go up and down completely randomly.

Pair Corralation between Hanesbrands and Siam Commercial

Considering the 90-day investment horizon Hanesbrands is expected to generate 26.13 times less return on investment than Siam Commercial. But when comparing it to its historical volatility, Hanesbrands is 40.5 times less risky than Siam Commercial. It trades about 0.18 of its potential returns per unit of risk. The Siam Commercial is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  10,700  in The Siam Commercial on September 4, 2024 and sell it today you would earn a total of  900.00  from holding The Siam Commercial or generate 8.41% return on investment over 90 days.

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

Hanesbrands  vs.  The Siam Commercial

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.

Siam Commercial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Siam Commercial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Siam Commercial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hanesbrands and Siam Commercial

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

The idea behind Hanesbrands and The Siam Commercial 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.