Correlation Between Hewlett Packard and AAP
Can any of the company-specific risk be diversified away by investing in both Hewlett Packard and AAP 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 Hewlett Packard and AAP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hewlett Packard Enterprise and AAP Inc, you can compare the effects of market volatilities on Hewlett Packard and AAP 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 Hewlett Packard with a short position of AAP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hewlett Packard and AAP.
Diversification Opportunities for Hewlett Packard and AAP
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hewlett and AAP is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Hewlett Packard Enterprise and AAP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAP Inc and Hewlett Packard 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 Hewlett Packard Enterprise are associated (or correlated) with AAP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAP Inc has no effect on the direction of Hewlett Packard i.e., Hewlett Packard and AAP go up and down completely randomly.
Pair Corralation between Hewlett Packard and AAP
Considering the 90-day investment horizon Hewlett Packard is expected to generate 43.11 times less return on investment than AAP. But when comparing it to its historical volatility, Hewlett Packard Enterprise is 16.34 times less risky than AAP. It trades about 0.05 of its potential returns per unit of risk. AAP Inc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 0.03 in AAP Inc on September 1, 2024 and sell it today you would lose (0.01) from holding AAP Inc or give up 33.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.47% |
| Values | Daily Returns |
Hewlett Packard Enterprise vs. AAP Inc
Performance |
| Timeline |
| Hewlett Packard Ente |
| AAP Inc |
Hewlett Packard and AAP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hewlett Packard and AAP
The main advantage of trading using opposite Hewlett Packard and AAP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hewlett Packard position performs unexpectedly, AAP 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 AAP will offset losses from the drop in AAP's long position.| Hewlett Packard vs. Nokia Corp ADR | Hewlett Packard vs. Juniper Networks | Hewlett Packard vs. Ciena Corp | Hewlett Packard vs. Motorola Solutions |
| AAP vs. Baylin Technologies | AAP vs. Viavi Solutions | AAP vs. SatixFy Communications | AAP vs. Electronic Systems Technology |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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