Correlation Between Visa and Hanesbrands
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and Hanesbrands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Hanesbrands, you can compare the effects of market volatilities on Visa 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 Visa with a short position of Hanesbrands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Hanesbrands.
Diversification Opportunities for Visa and Hanesbrands
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and Hanesbrands is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Hanesbrands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanesbrands and Visa 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 Visa Class A 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 Visa i.e., Visa and Hanesbrands go up and down completely randomly.
Pair Corralation between Visa and Hanesbrands
Taking into account the 90-day investment horizon Visa is expected to generate 1.68 times less return on investment than Hanesbrands. But when comparing it to its historical volatility, Visa Class A is 3.43 times less risky than Hanesbrands. It trades about 0.37 of its potential returns per unit of risk. Hanesbrands is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 727.00 in Hanesbrands on August 27, 2024 and sell it today you would earn a total of 118.00 from holding Hanesbrands or generate 16.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Hanesbrands
Performance |
| Timeline |
| Visa Class A |
| Hanesbrands |
Visa and Hanesbrands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Hanesbrands
The main advantage of trading using opposite Visa and Hanesbrands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. Morningstar Unconstrained Allocation | Visa vs. Sitka Gold Corp | Visa vs. MSCI ACWI exAUCONSUMER |
| 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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