Correlation Between GM and Hanesbrands
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Hanesbrands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Hanesbrands, you can compare the effects of market volatilities on GM 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 GM with a short position of Hanesbrands. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Hanesbrands.
Diversification Opportunities for GM and Hanesbrands
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Hanesbrands is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Hanesbrands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanesbrands and GM 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 General Motors 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 GM i.e., GM and Hanesbrands go up and down completely randomly.
Pair Corralation between GM and Hanesbrands
Allowing for the 90-day total investment horizon GM is expected to generate 2.95 times less return on investment than Hanesbrands. But when comparing it to its historical volatility, General Motors is 1.59 times less risky than Hanesbrands. It trades about 0.12 of its potential returns per unit of risk. Hanesbrands is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 716.00 in Hanesbrands on August 31, 2024 and sell it today you would earn a total of 158.00 from holding Hanesbrands or generate 22.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Hanesbrands
Performance |
| Timeline |
| General Motors |
| Hanesbrands |
GM and Hanesbrands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Hanesbrands
The main advantage of trading using opposite GM and Hanesbrands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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.The idea behind General Motors and Hanesbrands 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.| 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
Other Complementary Tools
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum |