Correlation Between HP and IMPERIAL TOBACCO
Can any of the company-specific risk be diversified away by investing in both HP and IMPERIAL TOBACCO 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 HP and IMPERIAL TOBACCO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and IMPERIAL TOBACCO , you can compare the effects of market volatilities on HP and IMPERIAL TOBACCO 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 HP with a short position of IMPERIAL TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and IMPERIAL TOBACCO.
Diversification Opportunities for HP and IMPERIAL TOBACCO
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HP and IMPERIAL is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and IMPERIAL TOBACCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IMPERIAL TOBACCO and HP 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 HP Inc are associated (or correlated) with IMPERIAL TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IMPERIAL TOBACCO has no effect on the direction of HP i.e., HP and IMPERIAL TOBACCO go up and down completely randomly.
Pair Corralation between HP and IMPERIAL TOBACCO
Assuming the 90 days horizon HP is expected to generate 10.78 times less return on investment than IMPERIAL TOBACCO. In addition to that, HP is 2.73 times more volatile than IMPERIAL TOBACCO . It trades about 0.01 of its total potential returns per unit of risk. IMPERIAL TOBACCO is currently generating about 0.42 per unit of volatility. If you would invest 2,779 in IMPERIAL TOBACCO on September 2, 2024 and sell it today you would earn a total of 300.00 from holding IMPERIAL TOBACCO or generate 10.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HP Inc vs. IMPERIAL TOBACCO
Performance |
| Timeline |
| HP Inc |
| IMPERIAL TOBACCO |
HP and IMPERIAL TOBACCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and IMPERIAL TOBACCO
The main advantage of trading using opposite HP and IMPERIAL TOBACCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, IMPERIAL TOBACCO 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 IMPERIAL TOBACCO will offset losses from the drop in IMPERIAL TOBACCO's long position.| HP vs. IMPERIAL TOBACCO | HP vs. China BlueChemical | HP vs. Soken Chemical Engineering | HP vs. Japan Medical Dynamic |
| IMPERIAL TOBACCO vs. SIVERS SEMICONDUCTORS AB | IMPERIAL TOBACCO vs. Darden Restaurants | IMPERIAL TOBACCO vs. Reliance Steel Aluminum | IMPERIAL TOBACCO vs. Q2M Managementberatung AG |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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