Correlation Between Continental and Hanesbrands
Can any of the company-specific risk be diversified away by investing in both Continental and Hanesbrands 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 Continental and Hanesbrands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Caleres and Hanesbrands, you can compare the effects of market volatilities on Continental and Hanesbrands 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 Continental with a short position of Hanesbrands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Continental and Hanesbrands.
Diversification Opportunities for Continental and Hanesbrands
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Continental and Hanesbrands is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Caleres and Hanesbrands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanesbrands and Continental 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 Caleres are associated (or correlated) with Hanesbrands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanesbrands has no effect on the direction of Continental i.e., Continental and Hanesbrands go up and down completely randomly.
Pair Corralation between Continental and Hanesbrands
Considering the 90-day investment horizon Caleres is expected to generate 0.61 times more return on investment than Hanesbrands. However, Caleres is 1.64 times less risky than Hanesbrands. It trades about -0.13 of its potential returns per unit of risk. Hanesbrands is currently generating about -0.11 per unit of risk. If you would invest 3,938 in Caleres on January 26, 2024 and sell it today you would lose (265.00) from holding Caleres or give up 6.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Caleres vs. Hanesbrands
Performance |
| Timeline |
| Continental |
| Hanesbrands |
Continental and Hanesbrands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Continental and Hanesbrands
The main advantage of trading using opposite Continental and Hanesbrands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Continental position performs unexpectedly, Hanesbrands 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 Hanesbrands will offset losses from the drop in Hanesbrands' long position.| Continental vs. American Eagle Outfitters | Continental vs. Abercrombie Fitch | Continental vs. Urban Outfitters | Continental vs. Foot Locker |
| Hanesbrands vs. Ralph Lauren Corp | Hanesbrands vs. Levi Strauss Co | Hanesbrands vs. Under Armour C | Hanesbrands vs. PVH Corp |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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