Correlation Between GM and HEWLETT

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Can any of the company-specific risk be diversified away by investing in both GM and HEWLETT 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 GM and HEWLETT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and HEWLETT PACKARD ENTERPRISE, you can compare the effects of market volatilities on GM and HEWLETT 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 GM with a short position of HEWLETT. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and HEWLETT.

Diversification Opportunities for GM and HEWLETT

0.08
  Correlation Coefficient
 GM

Significant diversification

The 3 months correlation between GM and HEWLETT is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and HEWLETT PACKARD ENTERPRISE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEWLETT PACKARD ENTE and GM 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 General Motors are associated (or correlated) with HEWLETT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEWLETT PACKARD ENTE has no effect on the direction of GM i.e., GM and HEWLETT go up and down completely randomly.

Pair Corralation between GM and HEWLETT

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the HEWLETT. In addition to that, GM is 5.55 times more volatile than HEWLETT PACKARD ENTERPRISE. It trades about -0.22 of its total potential returns per unit of risk. HEWLETT PACKARD ENTERPRISE is currently generating about -0.16 per unit of volatility. If you would invest  9,667  in HEWLETT PACKARD ENTERPRISE on November 28, 2024 and sell it today you would lose (150.00) from holding HEWLETT PACKARD ENTERPRISE or give up 1.55% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

General Motors  vs.  HEWLETT PACKARD ENTERPRISE

 Performance 
       Timeline  
General Motors 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.
HEWLETT PACKARD ENTE 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days HEWLETT PACKARD ENTERPRISE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HEWLETT is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

GM and HEWLETT Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GM and HEWLETT

The main advantage of trading using opposite GM and HEWLETT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, HEWLETT 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 HEWLETT will offset losses from the drop in HEWLETT's long position.
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The idea behind General Motors and HEWLETT PACKARD ENTERPRISE 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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