Correlation Between HP and RETAIL FOOD
Can any of the company-specific risk be diversified away by investing in both HP and RETAIL FOOD 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 RETAIL FOOD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and RETAIL FOOD GROUP, you can compare the effects of market volatilities on HP and RETAIL FOOD 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 RETAIL FOOD. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and RETAIL FOOD.
Diversification Opportunities for HP and RETAIL FOOD
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between HP and RETAIL is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc and RETAIL FOOD GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RETAIL FOOD GROUP 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 RETAIL FOOD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RETAIL FOOD GROUP has no effect on the direction of HP i.e., HP and RETAIL FOOD go up and down completely randomly.
Pair Corralation between HP and RETAIL FOOD
Assuming the 90 days horizon HP is expected to generate 1.09 times less return on investment than RETAIL FOOD. But when comparing it to its historical volatility, HP Inc is 1.33 times less risky than RETAIL FOOD. It trades about 0.08 of its potential returns per unit of risk. RETAIL FOOD GROUP is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2.70 in RETAIL FOOD GROUP on August 25, 2024 and sell it today you would earn a total of 1.40 from holding RETAIL FOOD GROUP or generate 51.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HP Inc vs. RETAIL FOOD GROUP
Performance |
| Timeline |
| HP Inc |
| RETAIL FOOD GROUP |
HP and RETAIL FOOD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HP and RETAIL FOOD
The main advantage of trading using opposite HP and RETAIL FOOD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP position performs unexpectedly, RETAIL FOOD 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 RETAIL FOOD will offset losses from the drop in RETAIL FOOD's long position.The idea behind HP Inc and RETAIL FOOD GROUP 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.| RETAIL FOOD vs. Apple Inc | RETAIL FOOD vs. Apple Inc | RETAIL FOOD vs. Apple Inc | RETAIL FOOD vs. Apple Inc |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
Other Complementary Tools
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Stocks Directory Find actively traded stocks across global markets | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities |