Correlation Between Hanesbrands and US Treasury

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

By analyzing existing cross correlation between Hanesbrands and US Treasury 5, you can compare the effects of market volatilities on Hanesbrands and US Treasury 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 US Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanesbrands and US Treasury.

Diversification Opportunities for Hanesbrands and US Treasury

-0.68

Correlation Coefficient

Hanesbrands  US Treasury

Excellent diversification

The 3 months correlation between Hanesbrands and UFIV is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Hanesbrands and US Treasury 5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Treasury 5 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 US Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Treasury 5 has no effect on the direction of Hanesbrands i.e., Hanesbrands and US Treasury go up and down completely randomly.

Pair Corralation between Hanesbrands and US Treasury

Considering the 90-day investment horizon Hanesbrands is expected to generate 13.25 times more return on investment than US Treasury. However, Hanesbrands is 13.25 times more volatile than US Treasury 5. It trades about 0.18 of its potential returns per unit of risk. US Treasury 5 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 Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Hanesbrands  vs.  US Treasury 5

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.

US Treasury 5

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US Treasury 5 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, US Treasury is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Hanesbrands and US Treasury

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

The idea behind Hanesbrands and US Treasury 5 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.