Correlation Between Hanesbrands and Espey Mfg

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

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

Diversification Opportunities for Hanesbrands and Espey Mfg

0.56

Correlation Coefficient

Hanesbrands  Espey Mfg

Very weak diversification

The 3 months correlation between Hanesbrands and Espey is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Hanesbrands and Espey Mfg Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Espey Mfg Electronics 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 Espey Mfg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Espey Mfg Electronics has no effect on the direction of Hanesbrands i.e., Hanesbrands and Espey Mfg go up and down completely randomly.

Pair Corralation between Hanesbrands and Espey Mfg

Considering the 90-day investment horizon Hanesbrands is expected to generate 2.01 times more return on investment than Espey Mfg. However, Hanesbrands is 2.01 times more volatile than Espey Mfg Electronics. It trades about 0.23 of its potential returns per unit of risk. Espey Mfg Electronics is currently generating about -0.18 per unit of risk. If you would invest  712.00  in Hanesbrands on September 5, 2024 and sell it today you would earn a total of  155.00  from holding Hanesbrands or generate 21.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Hanesbrands  vs.  Espey Mfg Electronics

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.

Espey Mfg Electronics

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Espey Mfg Electronics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Espey Mfg reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hanesbrands and Espey Mfg

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

The idea behind Hanesbrands and Espey Mfg Electronics 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.