Correlation Between Columbia Sportswear and Hanesbrands
Can any of the company-specific risk be diversified away by investing in both Columbia Sportswear 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 Columbia Sportswear and Hanesbrands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Columbia Sportswear and Hanesbrands, you can compare the effects of market volatilities on Columbia Sportswear 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 Columbia Sportswear with a short position of Hanesbrands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Sportswear and Hanesbrands.
Diversification Opportunities for Columbia Sportswear and Hanesbrands
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Columbia and Hanesbrands is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Sportswear and Hanesbrands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanesbrands and Columbia Sportswear 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 Columbia Sportswear 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 Columbia Sportswear i.e., Columbia Sportswear and Hanesbrands go up and down completely randomly.
Pair Corralation between Columbia Sportswear and Hanesbrands
Given the investment horizon of 90 days Columbia Sportswear is expected to generate 12.75 times less return on investment than Hanesbrands. But when comparing it to its historical volatility, Columbia Sportswear is 2.36 times less risky than Hanesbrands. It trades about 0.02 of its potential returns per unit of risk. Hanesbrands is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 540.00 in Hanesbrands on August 27, 2024 and sell it today you would earn a total of 314.00 from holding Hanesbrands or generate 58.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Columbia Sportswear vs. Hanesbrands
Performance |
| Timeline |
| Columbia Sportswear |
| Hanesbrands |
Columbia Sportswear and Hanesbrands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Columbia Sportswear and Hanesbrands
The main advantage of trading using opposite Columbia Sportswear and Hanesbrands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Columbia Sportswear 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.| Columbia Sportswear vs. VF Corporation | Columbia Sportswear vs. Levi Strauss Co | Columbia Sportswear vs. Under Armour A | Columbia Sportswear vs. Oxford Industries |
| Hanesbrands vs. VF Corporation | Hanesbrands vs. Levi Strauss Co | Hanesbrands vs. Under Armour A | Hanesbrands vs. Oxford Industries |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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