Correlation Between Hanesbrands and Capri Holdings

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

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

Diversification Opportunities for Hanesbrands and Capri Holdings

-0.64

Correlation Coefficient

Hanesbrands  Capri Holdings

Excellent diversification

The 3 months correlation between Hanesbrands and Capri is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Hanesbrands and Capri Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capri Holdings 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 Capri Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capri Holdings has no effect on the direction of Hanesbrands i.e., Hanesbrands and Capri Holdings go up and down completely randomly.

Pair Corralation between Hanesbrands and Capri Holdings

Considering the 90-day investment horizon Hanesbrands is expected to under-perform the Capri Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Hanesbrands is 1.4 times less risky than Capri Holdings. The stock trades about -0.08 of its potential returns per unit of risk. The Capri Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,048  in Capri Holdings on September 23, 2024 and sell it today you would earn a total of  62.00  from holding Capri Holdings or generate 3.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Hanesbrands  vs.  Capri Holdings

Hanesbrands

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hanesbrands are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental drivers, Hanesbrands demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Capri Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capri Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Hanesbrands and Capri Holdings

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

The idea behind Hanesbrands and Capri Holdings 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.