Correlation Between Hanesbrands and Cincinnati Financial
Can any of the company-specific risk be diversified away by investing in both Hanesbrands and Cincinnati Financial 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 Cincinnati Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hanesbrands and Cincinnati Financial, you can compare the effects of market volatilities on Hanesbrands and Cincinnati Financial 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 Cincinnati Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanesbrands and Cincinnati Financial.
Diversification Opportunities for Hanesbrands and Cincinnati Financial
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hanesbrands and Cincinnati is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Hanesbrands and Cincinnati Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cincinnati Financial 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 Cincinnati Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cincinnati Financial has no effect on the direction of Hanesbrands i.e., Hanesbrands and Cincinnati Financial go up and down completely randomly.
Pair Corralation between Hanesbrands and Cincinnati Financial
Considering the 90-day investment horizon Hanesbrands is expected to generate 2.25 times more return on investment than Cincinnati Financial. However, Hanesbrands is 2.25 times more volatile than Cincinnati Financial. It trades about 0.24 of its potential returns per unit of risk. Cincinnati Financial is currently generating about 0.39 per unit of risk. If you would invest 712.00 in Hanesbrands on September 3, 2024 and sell it today you would earn a total of 158.00 from holding Hanesbrands or generate 22.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
Hanesbrands vs. Cincinnati Financial
Performance |
| Timeline |
| Hanesbrands |
| Cincinnati Financial |
Hanesbrands and Cincinnati Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hanesbrands and Cincinnati Financial
The main advantage of trading using opposite Hanesbrands and Cincinnati Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hanesbrands position performs unexpectedly, Cincinnati Financial 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 Cincinnati Financial will offset losses from the drop in Cincinnati Financial's long position.| Hanesbrands vs. Ralph Lauren Corp | Hanesbrands vs. Levi Strauss Co | Hanesbrands vs. Under Armour C | Hanesbrands vs. PVH Corp |
| Cincinnati Financial vs. JJ SNACK FOODS | Cincinnati Financial vs. Taiwan Semiconductor Manufacturing | Cincinnati Financial vs. ELMOS SEMICONDUCTOR | Cincinnati Financial vs. MOLSON RS BEVERAGE |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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