Correlation Between Hanesbrands and PETCO HEALTH

Can any of the company-specific risk be diversified away by investing in both Hanesbrands and PETCO HEALTH 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 PETCO HEALTH into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hanesbrands and PETCO HEALTH CLA, you can compare the effects of market volatilities on Hanesbrands and PETCO HEALTH 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 PETCO HEALTH. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanesbrands and PETCO HEALTH.

Diversification Opportunities for Hanesbrands and PETCO HEALTH

0.33

Correlation Coefficient

Hanesbrands  PETCO HEALTH

Weak diversification

The 3 months correlation between Hanesbrands and PETCO is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Hanesbrands and PETCO HEALTH CLA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PETCO HEALTH CLA 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 PETCO HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PETCO HEALTH CLA has no effect on the direction of Hanesbrands i.e., Hanesbrands and PETCO HEALTH go up and down completely randomly.

Pair Corralation between Hanesbrands and PETCO HEALTH

Considering the 90-day investment horizon Hanesbrands is expected to generate 2.15 times less return on investment than PETCO HEALTH. But when comparing it to its historical volatility, Hanesbrands is 2.28 times less risky than PETCO HEALTH. It trades about 0.17 of its potential returns per unit of risk. PETCO HEALTH CLA is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  270.00  in PETCO HEALTH CLA on September 5, 2024 and sell it today you would earn a total of  215.00  from holding PETCO HEALTH CLA or generate 79.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Hanesbrands  vs.  PETCO HEALTH CLA

Hanesbrands

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hanesbrands are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting fundamental drivers, Hanesbrands demonstrated solid returns over the last few months and may actually be approaching a breakup point.

PETCO HEALTH CLA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PETCO HEALTH CLA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PETCO HEALTH reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hanesbrands and PETCO HEALTH

The main advantage of trading using opposite Hanesbrands and PETCO HEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hanesbrands position performs unexpectedly, PETCO HEALTH 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 PETCO HEALTH will offset losses from the drop in PETCO HEALTH's long position.

The idea behind Hanesbrands and PETCO HEALTH CLA 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.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.